Market Report: Dashed hopes of lower rates trigger a slide

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ANY hopes of a pre-Christmas reduction in interest rates were quashed yesterday by the statements by Norman Lamont, the Chancellor, and the German Bundesbank.

Equities remained in negative territory all day, with few investors prepared to be adventurous ahead of the end of the account today. The decline accelerated towards the close as profit-taking knocked Wall Street.

The FT-SE 100 index was left nursing a loss of 24.2 points on the day at 2,726.5, and showing a shortfall of 33.6 over the account so far.

Volume trading was respectable, although a large part of the 711 million shares going through the market owed much to dealers closing positions before the onset of the long three-week Christmas account.

Disappointing corporate results and a tranche of downgradings were prominent features. There were few bright spots.

Lonrho's overnight disclosure of a rights issue, coupled with Rowland 'Tiny' Rowland's decision to sell almost half of his shareholding met with a chilly response.

Some 6 million shares were traded, and the price fell 4p to 75p, against the 85p rights terms.

The fall-out from the cautious trading statement from Guinness on Wednesday continued. Another 24p was wiped off the price to 478p, making a two- day decline of 47p - nearly 9 per cent.

Trading in the drinks giant was heavy at 7.4 million amid analysts' downgradings of profit expectations of between pounds 40m and pounds 50m, taking the consensus of opinion for this year's result considerably adrift of pounds 1bn.

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BZW, which was said to be recommending a switch into Grand Metropolitan, has lowered its prediction for 1992 from pounds 964m to pounds 920m, and for next year from pounds 1.06bn to pounds 980m.

Grand Met, however, managed to recoup more than half of the previous day's fall, rising 7p to 430p - a price at which Sir Allen Sheppard, chairman and chief executive, managed to sell 117,610 shares.

On Wednesday he exercised options over 137,000 shares at 270p each, and he was yesterday granted rights over another 87,000 at 423p each.

Allied-Lyons, though, failed to avoid the down-draught from Guinness, and slipped a further 11p to 617p.

There were few gainers in the drinks sector. Taunton was one, advancing 6p to 198p on more than doubled profits. Greenalls added 4p to 360p following Wednesday's results.

Amid the downgradings, TSB slipped 4p to 139p as Smith New Court went a stage further than other houses, halving its profit estimate to pounds 62m. HSBC was overshadowed by the political problems in Hong Kong, and lost 13p to 471p.

Among other financials, there was late activity in First National Finance Corporation. A string of delayed trades went through towards the close.

There was talk that the company could announce worse than expected figures next month, largely because of its exposure to the second mortgage market. The shares closed unchanged at 45p.

Arjo Wiggins Appleton, the printing, paper and packaging company, also suffered from downgrading. The shares lost 8p to 143p, with UBS Philips & Drew cutting its forecasts for 1992 from pounds 185m to pounds 160m, and for next year from pounds 190m to pounds 158.

'Economic growth in Europe next year is likely to be sluggish, virtually non-existent,' and European pulp and paper prices were weakening, said Sonia Falaschi, an analyst at UBS.

Stores remained weak, hindered partially by GUS, which came in with figures at the bottom end of expectations. GUS 'A' dropped 35p to pounds 16.18, Dixons softened 2p to 263p, Boots slipped 8p to 519p, Kingfisher eased 7p to 569p, and Marks & Spencer fell 9p to 319p.

This week's newcomers continued to advance. National Express, which started life yesterday at 165p, closed at 171p with 4.5 million traded.

Tadpole Technology, placed at 65p on Monday, rose 11p to 146p, with one trade struck at 150p. There was also some new time buying. Hunters Armley, which started the week at 60p, gained 2p to 102p.

Profit-taking knocked 6p off Ladbroke Group to 184p, and 3p from Airtours to 261p.

The day's biggest gain was in Graig Shipping, after the company disclosed it was in bid talks. The 'A' shares sprinted 44p to 118p. Ramco rose 13p to 89p on acquisition speculation.

Eurotunnel, down 19p at one stage, closed just 6p off at 447p after dismissing adverse French press reports over the company's pounds 1.3bn claims dispute talks with Transmanche Link.

Declines were widespread and often heavy among equities yesterday. The FT-SE index of the 100 leading companies dropped below 2,750, losing 24.2 points to 2,726.5. The FT 30 fell 10.6 points to 2,064.2, and the FT-SE 250 eased 6.9 points to 2,665.6. The volume of share trading was strong at 700 million

There was renewed speculation that Queens Moat Houses and Bass were close to a hotels deal. Bass last week declined to comment on the rumours when announcing annual results. Queens, which has links with Brierley Investments' Mount Charlotte chain, is said to be keen on a room booking venture with Bass. Queens eased 1p to 39p, and Bass shed 6p to 604p.

First Leisure escaped the market's malaise, holding at 300p as Lord Rayne, chairman, made optimistic noises. Lord Rayne said it was 'well placed to produce another good result for shareholders'. His statement was in the results for London Merchant Securities, the property company of which he is also chairman and which is a big shareholder in First Leisure.