Market Report: Blue chips leave the small fry behind

BLUE CHIPS once again displayed a clean pair of heels to their smaller brethren. As Footsie's recovery continued the stock market's supporting shares endured another nervous, despairing session.

There were stories that leading fund managers were dumping second-line stocks. Mercury Asset Management, part of Merrill Lynch, was said to have unloaded supporting shares, particularly chemicals and engineers.

The contrast in the fortunes of blue chips and the under-card was dramatic. Footsie jumped 111.4 to 5,214.7 as the mid cap index lost 8 to 4,564.2 and the small cap dropped 3.4 to 2,032.6, yet another low for the year.

The feeling that blue chips had been hit too hard in the downward spiral from the July peak, plus takeover hopes and a growing expectation that interest rate cuts will soon appear, spurred leaders.

But there was unease amid the euphoria. NatWest Stockbrokers' head of research, Jeremy Batstone, warned that shares could be hit by deflationary pressures next year. He suggested a cut of up to 40 per cent could materialise. Still, in the meantime, he expects Footsie will rebound to around 5,800 by the end of the year.

Waters, regarded as safe havens in the market slide, took a bath on the pounds 8.5bn Government demand for price cuts and improvements to the quality of services provided. Severn Trent fell 40p to 1,062p and United Utilities 32p to 908p.

There seemed to be a heavy flow of profit downgradings. Bass, hit last week by a profits warning, was again flat on suggestions that analysts, after talks with the group, were preparing to pull forecasts even lower than the pounds 640m or so they alighted on after the Bass caution.

Storehouse slumped 24.5p to 185p. BT Alex.Brown did the damage. The investment house cut its estimates by pounds 7m to pounds 127m for this year, by pounds 12m to pounds 136m for next year and by pounds 12.5m to pounds 150m for the following year.

Still the takeover speculation industry continued to thrive. GRE, up 19.5p at 277.5p, was again seen as an Allied Zurich target. The feeling that bid action could break out among the depressed insurers lifted Royal & Sun Alliance 46.5p to 553p and CGU 59p to 936p. Tuesday's other bid candidate, Reed International, rose a further 15.5p to 550p.

Granada's investment presentation provided inspiration, with the shares up 51p to 777p; Lehman Brothers said buy, repeating its 950p target.

Marks & Spencer edged forward 4p to 444p as ABN Amro said buy, and Next improved 25.25p to 399.25p after chief executive David Jones picked up 100,000 shares at 370.5p and director Simon Wolfson 270,000 at 370.9p.

ABN was also behind a 26p jump to 377p by British Aerospace, and Cable & Wireless scored from CSFB buy advice, gaining 38p to 558p.

Ladbroke was unfazed by the block on its Coral betting shop acquisition, cantering 17.75p to 222p. Energis put on 52.5p to 775p in a further reflection of the Henderson Crosthwaite buy recommendation.

LucasVarity, the engineer, moved ahead 5p to 200p. There is growing unease about its proposal to move its domicile to the US. John Buckland at Daiwa says the reasons put forward for the switch are at best tenuous, and "the protestations about increasing shareholder value are dubious".

Centrica rose 5p to 111.5p on talk that the Italians were planning to import gas from the company. Oils strengthened on a firmer crude price and hopes of a world oil summit; Enterprise Oil gained 19.5p to 390p.

Supermarkets were largely unruffled by the Office of Fair Trading-sponsored probe. Asda, at one time up 13.5p, ended 3p higher at 174.5p and Tesco gained 2.75p to 171.75p. Safeway, Somerfield and J Sainsbury ended a little lower.

Brake Brothers, supplying convenience food to caterers, was roasted 112.5p to 635p after making what the market regarded as a profits warning. The company, however, disputed such an interpretation of its comments.

The day's worst performer was Infobank, off 77.5p to 42.5p. It blew a fuse after what was unquestionably a profits warning by the electronic systems and software group. The shares were floated at 125p in February last year.

Euro Sales Finance, providing finance to small and medium sized companies, slipped 7.5p to 280p after duly reporting profits of pounds 1.36m against pounds 563,000 and disclosing plans to move from AIM to a full listing.

Memory Corporation's run continued, with the shares moving ahead 6.5p to 28p. They have climbed from 15p on Monday, when BancBoston Robertson Stephens put a 50p target on the shares.

Emerald Energy held at 9.25p. It made encouraging noises about its Gigante drill in Colombia, saying a positive outcome is expected in two weeks. Talk in the market suggests that a 1.2 billion barrel field has been discovered, which could be worth 23p an Emerald share.

SEAQ VOLUME: 943.4 million

SEAQ TRADES: 57,121

GILT INDEX: 111.01 -0.55

NATWEST Enterprise Trust, a venture capital group where National Westminster Bank is the biggest shareholder, jumped 30.5p to 304.5p, a peak, as possible predators made their presence known. At the end of June the company's net assets were around 370p a share. The trust said a number of parties had shown interest. Because of a conflict of interest, ABN Amro is no longer the company's stockbroker, replaced by West Merchant Bank.

ZERGO, an electronic information group, firmed 10p to 265p, a long way from the 476.5p peak hit when information technology shares enjoyed the top of their bonanza this year. The group's shares were firm on HSBC's decision to start producing research on the company. No doubt it was merely a coincidence that on Monday Zergo clinched a pounds 300,000 contract with Midland Bank, part of HSBC.

PROMOTED VIDEO
Arts and Entertainment
tv
News
Prince Harry is clearing enjoying the Commonwealth Games judging by this photo
people(a real one this time)
News
Gardai wait for the naked man, who had gone for a skinny dip in Belfast Lough
newsTwo skinny dippers threatened with inclusion on sex offenders’ register as naturists criminalised
News
Your picture is everything in the shallow world of online dating
i100
Life and Style
Attractive women on the Internet: not a myth
techOkCupid boasts about Facebook-style experiments on users
Sport
Van Gaal said that his challenge in taking over Bobby Robson's Barcelona team in 1993 has been easier than the task of resurrecting the current United side
football
News
ebookA unique anthology of reporting and analysis of a crucial period of history
Latest stories from i100
Have you tried new the Independent Digital Edition apps?
Independent Dating
and  

By clicking 'Search' you
are agreeing to our
Terms of Use.

iJobs Job Widget
iJobs Money & Business

PA / Team Secretary - Wimbledon

£28000 - £32000 per annum + Benefits: Ashdown Group: PA / Team Secretary - Mat...

HR Business Partner (Maternity Cover 12 Months)

£30000 - £34000 Per Annum 25 days holiday, Private healthcare: Clearwater Peop...

Business Analyst - London - Banking - £400-£450

£400 - £450 per day: Orgtel: Business Analyst - Credit Risk - Banking - London...

Project Manager,Conduct Risk,London,£5-600pd

£500 - £600 per day + competitive: Orgtel: My client, a leading bank, is curre...

Day In a Page

The children were playing in the street with toy guns. The air strikes were tragically real

The air strikes were tragically real

The children were playing in the street with toy guns
Boozy, ignorant, intolerant, but very polite – The British, as others see us

Britain as others see us

Boozy, ignorant, intolerant, but very polite
Countries that don’t survey their tigers risk losing them altogether

Countries that don’t survey their tigers risk losing them

Jonathon Porritt sounds the alarm
How did our legends really begin?

How did our legends really begin?

Applying the theory of evolution to the world's many mythologies
Watch out: Lambrusco is back on the menu

Lambrusco is back on the menu

Naff Seventies corner-shop staple is this year's Aperol Spritz
A new Russian revolution: Cracks start to appear in Putin’s Kremlin power bloc

A new Russian revolution

Cracks start to appear in Putin’s Kremlin power bloc
Eugene de Kock: Apartheid’s sadistic killer that his country cannot forgive

Apartheid’s sadistic killer that his country cannot forgive

The debate rages in South Africa over whether Eugene de Kock should ever be released from jail
Standing my ground: If sitting is bad for your health, what happens when you stay on your feet for a whole month?

Standing my ground

If sitting is bad for your health, what happens when you stay on your feet for a whole month?
Commonwealth Games 2014: Dai Greene prays for chance to rebuild after injury agony

Greene prays for chance to rebuild after injury agony

Welsh hurdler was World, European and Commonwealth champion, but then the injuries crept in
Israel-Gaza conflict: Secret report helps Israelis to hide facts

Patrick Cockburn: Secret report helps Israel to hide facts

The slickness of Israel's spokesmen is rooted in directions set down by pollster Frank Luntz
The man who dared to go on holiday

The man who dared to go on holiday

New York's mayor has taken a vacation - in a nation that has still to enforce paid leave, it caused quite a stir, reports Rupert Cornwell
Best comedians: How the professionals go about their funny business, from Sarah Millican to Marcus Brigstocke

Best comedians: How the professionals go about their funny business

For all those wanting to know how stand-ups keep standing, here are some of the best moments
The Guest List 2014: Forget the Man Booker longlist, Literary Editor Katy Guest offers her alternative picks

The Guest List 2014

Forget the Man Booker longlist, Literary Editor Katy Guest offers her alternative picks
Jokes on Hollywood: 'With comedy film audiences shrinking, it’s time to move on'

Jokes on Hollywood

With comedy film audiences shrinking, it’s time to move on