Market Report: Dixons surges despite retail gloom

ANOTHER SPARKY performance from Dixons, as the electrical chain continues to ignore the deepening retail gloom.

A poor set of retail figures for October pushed the already depressed shares of most shopkeepers even lower. But Dixons climbed 29p (after 40p) to close at 699p.

The shares have yet to return to the 720p peak hit last year but even so their recent strength should be enough to recapture their place in the Footsie index when the promoted and relegated are selected next month. The group lost its cherished index membership in March when its shares were 472.5p.

Most retailers are weighed down by falling consumer demand and fears that Christmas trading is going to lack anything approaching a festive spending spree.

Dixons, thought to have a better chance of enjoying Christmas than most, is also scoring from suggestions that it is an Internet play. It says its new, no-cost Internet service provider, Freeserve, has attracted 475,000 customers since its launch eight weeks ago. It had initially hoped for 250,000 by Christmas.

Freeserve, in itself, will not have much impact on Dixons' earnings outlook. It will, however, improve its profile, help computer sales and possibly attract some US investors, who have sent Internet shares soaring recently.

The electrical chain is expected to score this year from the growth of the personal computer market as well as benefiting from the scramble which appears to have developed following the digital television launch.

Dixons' improved prospects prompted the investment house Warburg Dillon Read to put a 725p target on the shares.

Safeway, the supermarket chain, was the other outperforming retail share. Although interim profits suffered the predicted fall and the group was gloomy about Christmas trading, the stock market was impressed by its current turnover. Sales are up 4.9 per cent in the first five weeks of its second half, enough to give the shares a 14.5p whirl to 290.5p.

Footsie enjoyed another strong opening on the US interest rate cut and then, as so often happens, ran out of steam; it closed 28.7 points lower at 5,474. Supporting shares were also in negative territory. Government stocks made headway.

Oils were ruffled by gloomy comments from John Browne, British Petroleum's chief executive, and talk at a London conference that the crude price could plunge to $5 a barrel.

Mr Browne, in a television interview, said BP expects oil prices to remain weak and chemical and refining margins to edge lower. Opec ministers are due to meet in Vienna soon and are unlikely to attempt to hoist prices. BP eased to 936.5p and Shell lost 3.5p to 353.25p.

Tomkins, the conglomerate, lost 24.75p to 249p as the soothing tones at its investment presentation were eclipsed by growing concerns about the outbreak of gun litigation in the US. The P&O shipping group sank 30.5p to 587.5p following an investment update.

Vodafone, reflecting figures, jumped 41p to 879p; Energis was dialled 125p higher at 995p following figures, prompting its parent, National Grid, to add 12p to 463p.

Takeover hopes continued to influence GRE, the insurance group, up a further 5.5p to 299p.

Bids are still appearing on the under-card. Management buyouts lifted Clyde Blowers, an engineer, 23.5p to 166p and City Site, a property group, 8.5p to 26.5p. Profit warnings were also in evidence. Eclipse Blinds was lowered 15p to 71.5p; Bramner, a control systems group, 60p to 307.5p; European Motor 10.5p to 54p and Ben Bailey, a builder, 7.5p to 57.5p. Fears of profit downgradings fused Electrocomponents 32.5p to 360p.

Greenways, a waste group, tumbled 8p to 26p after a 47 per cent profits fall.

Food producers remained under the whip, following Northern Foods' unappetising trading fare. Northern fell a further 6.5p to 148.5p and Hillsdown Holdings 6.5p to 78.5p. Terranova,the Hillsdown spin-off which touched 140p just after the demerger, retreated a further 5.5p to 96p.

Dagenham Motors accelerated in late trading. The price jumped 12p to 152.5p as speculators anticipated takeover action. Ford and the car arm of Jardine Matheson have formed a joint venture which intends to become a force in car retailing. The possibility of a bid for Dagenham, one of the biggest Ford dealers, has already been signalled.

Burn Stewart, the struggling Scotch whisky distiller which has had a volatile time this month, firmed 1.5p to 16.5p. There are persistent suggestions that a bidder is stalking the group.

Heavy trading took place in Coffee Republic, the coffee shops chain. Seaq put volume at 46.2 million with, it appeared, shares being switched between institutional investors. The price held at 14p.

SEAQ VOLUME: 863.7 million

SEAQ TRADES: 54,589

GILT INDEX: 112.93 +0.56

POSIT, a new electronic share trading system, made an impressive debut. At its first two matching sessions, 17.6 million shares, worth pounds 80m, were traded in 295 bargains. Posit, owned by the French bank Societe Generale and Investment Technology of the US, says research suggests all market dealing will be executed electronically by 2006. The system has 70 clients and expects to take on three to four new ones a week.

ACTION COULD soon break out at Rage Software, the computer games group, which has moved back into profits. There are suggestions that a surprise switch by the company from the stockbroker Durlacher to its rival Teather & Greenwood is the prelude to corporate activity. The group's shareholders' meeting is due to take place on Monday. Rage shares firmed 0.5p to 10.5p; they were 15p in March and as high as 25p two years ago.