Market Report: BT takes turn for better as sale time approaches

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WITH the second instalment of the final BT sale looming the shares seem to be emerging from the doldrums.

After underperforming the stock market by 10 per cent in the past three months they ended the account on a confident tone, gaining 9.5p to 467.5p.

The partly paid shares managed a 9.5p gain to 209p. A payment of 140p is due by 1 March. The final contribution of 120p is scheduled for October.

Although some analysts are thought to have trimmed their profit forecasts in recent weeks, many regard the shares as a buy. Yesterday NatWest Securities and, it is thought, James Capel made positive comments.

The telecommunications giant will ring in with its third-quarter figures in the next account. On the surface they are not expected to be particularly encouraging, and NatWest is looking for pounds 670m against pounds 705m.

But stripping out special factors produces a more impressive result. NatWest suggests pounds 820m against pounds 778m.

The securities house believes that BT's underperformance is in part due to the looming second payment and that the weakness presents a buying opportunity.

The rest of the stock market experienced a remarkable swing. In early trading it looked as though the FT-SE 100 index would dip below 3,400 points.

The uninspiring figures from J Sainsbury following Thursday's high street gloom had shares in ragged retreat.

But US influences came to the rescue. New York's record-breaking display began to filter through. Then came some encouraging US economic statistics, which stirred government stocks and quickly had shares bubbling.

At the close the index was up 20.1 at 3,447.4 although the supporting FT-SE 250 index fell 10.6 to 4,065.8.

For the fifth time this year turnover exceeded 1 billion shares. The trading boom is producing volume figures in sharp contrast to the 300-400 million prevalent before interest rates started to decline.

The market has grown less expectant of an early interest rate cut. But it remains convinced that world rates will continue to fall. Further reductions in the next few months are therefore likely.

There is a widespread belief that Germany will be forced to lower its rates and such a move would force a British reaction.

Sainsbury led the already depressed supermarket sector lower. The shares slumped 48p to 393p. Argyll retreated 14p to 258p, Iceland 10p to 169p and Kwik Save 27p to 593p. Asda fell 3.5p to 58.5p and William Morrison 6p to 109p. Tesco, after dropping 9p, closed little changed at 222.5p.

Nervousness was evident among the rest of the stores sector but Marks and Spencer, which had helped to stir Thursday's disquiet, recovered 10p to 436.5p with Smith New Court among those taking the view that the shares had reacted too fiercely to the trading statement.

The food rot spread to manufacturers. If the retailers are under pressure they will attempt to improve their margins by squeezing better prices from the producers, ran the argument.

Booker fell 8p to 446p, Dalgety 19p to 503p, Hazlewood 9p to 155p, Northern Foods 15p to 232p, Unigate 16.5p to 392.5p and United Biscuits 9p to 369p.

Inchcape, the international trading group, which had turned in a firm performance on the improving car sales and a shift to a more positive approach by some analysts, ran into selling.

An investment meeting did the damage, with the group's performance not sufficiently upbeat for some. The shares fell 20p to 586p.

British Steel had another strong session, gaining 6.5p to 139p. This week's more confident display from the US steel industry is the main spur. The company was privatised five years ago at 125p.

Oils were firm. Shell, helped by the results of its US offshoot, rose 7p to 725p.

Trafalgar House fell 2p to 104p following the decision to auction, rather than place, its rights rump. TI Group, down 7p at 408p, was ruffled by talk that it had lost Airbus orders.

Utilities were in form. Waters rose strongly, with Thames up 16p to 592p. Electricities advanced, with the generators up as the market took the view that no news was good news in the confrontation with the regulator Offer. National Power put on 10p to 485p and PowerGen 11p to 565p.

Forte, which reported trading in line with expectations, gained 4.5p to 265.5p.

Kewill Systems, the computer group, held at 254p. The stockbroker Charles Stanley expects profits in the year to end March to surge from pounds 435,000 to pounds 3.2m. The sale of a German business has transformed the group.

Among tiddlers Waterglade International, the property group, continued its 1994 revival, rising 1p to 6.5p. A restructuring is being hammered out.

Jupiter Tyndall is an obvious beneficiary of a rampant stock market. The shares were firm at 276p with some predicting further progress, possibly from a bid. Fund manager Leonard Licht, who arrived in 1992 when the shares were about 100p, has already reaped rich rewards. He collected a pounds 1m signing-on fee, a pounds 600,000 a year salary and options on 1.8 million shares.

Allied-Lyons, the food and drink group, suffered a late fall, tumbling 21p to 627p. Philip Shaw, drinks analyst at Robert Fleming Securities, has cut this and next year's profit forecasts by pounds 15m to pounds 650m and pounds 700m and comments: 'Allied seems as lacklustre as ever'. He adds that the group needs to sell its breweries and other mature operations, such as tea.

The FT-SE 100 index swung from a 24-point deficit to a 20.1 gain to 3,447.4. Turnover was 1,144.2 million shares from 45,304 bargains. The account ends on 11 February with settlement on 21 February. Government stocks rose by up to pounds 1 2 .

(Photograph omitted)