Market Report: Downgradings contribute to a 41-point fall

IT WAS a day for special situations in the stock market. The FT-SE share index tumbled 41 points to 2,560 as more profit forecasts were cut and lines of unwanted stock hovered.

The deepening divisions over Maastricht and another uncomfortable session for sterling ensured that shares were under pressure from the start.

And, with many investors content to remain on the sidelines, the market had its quietest day since 'Devaluation Wednesday' with turnover of only 487.6 million shares.

A savage profit downgrading for Imperial Chemical Industries by Hoare Govett, one of the company's stockbrokers, was another inhibiting influence. So was a Grand Metropolitan forecast cut by Barclays de Zoete Wedd.

ICI shares crashed 63p to 1,145p as Hoare lowered from pounds 788m to pounds 620m for this year and from pounds 1bn to pounds 875m for next.

Grand Met lost 26p to 423p. Last month the food and drink giant, which had been expected to top pounds 1bn, said it expected profits to be 'broadly in line' with the previous year's pounds 950m.

BZW has gone even lower, cutting its forecast to pounds 930m. It has reduced its estimate for next year by pounds 30m to pounds 1.03bn.

The new forecasts appeared on a day when some large lines of Grand Met stock drifted around, apparently unwanted. One investment house offered about 3.8 million shares at 428p. Another was said to be a willing seller of 4.2 million shares.

The food group Dalgety, down 8p to 420p, and British Steel, 1.5p off at 61p, were among others suffering from an acute stock overhang.

T&N, the motor components group, fell 5p to 147p as it appeared that UBS Phillips & Drew had placed 6 million shares at 40.5p. Pentos, the bookseller, dropped 6p to 77p with 6 million shares placed, probably by Smith New Court.

Allied-Lyons, savaged last week by the arch bear raider 'Evel Knievel', weakened again as yet another downgrading appeared - this time from Societe Generale Strauss Turnbull.

The shares fell another 16p to 595p. Forte, the catering and hotel group, had a difficult session as fears that interim profits could be as low as pounds 25m pushed the shares down 8p to 132p.

Drug shares were again under the weather, hit by sudden US disenchantment with the sector. There was talk that Merrill Lynch had downgraded Wellcome, while worries that a Democrat poll victory will lead to curbs on US health spending continued to hover.

Glaxo Holdings fell 24p to 746p, SmithKline 8p to 473p and Wellcome 41p to 909p.

However, Nikko, the Japanese investment house, believes the weakness of UK drug shares has created a 'classic' buying opportunity. US investment houses are using the prospect of a Democrat victory 'as an excuse to encourage short-term investors to take profits', it said.

Fisons once again ignored the drug retreat. It gained 2p to 184p as the market held to its conviction that the troubled group will soon be rescued by a takeover bid. ICI and Astra of Sweden remain the favoured candidates.

Unilever, the Anglo-Dutch food group, continued to turn in a resilient performance, rising another 13p to 1,062p, near its all-time peak. Switching into the Dutch operation and hopes of a share split were the main influence. There were also rumours of a profits upgrade.

Kingfisher retreated 20p to 525p following an analyst visit to its B&Q do-it-yourself offshoot and a warning that a floating pound will lead to higher shop prices.

MFI, the flatpack furniture chain, lost 3p to 119p on a profits downgrading and another newcomer, the Kenwood Appliances kitchen equipment group, fell 42p to 245p with an Albert E Sharp estimate cut doing the damage.

Cable & Wireless remained weak, down 9p at 573p as its proposed USWest link seemed to be receeding rapidly, and the Racal-Special-Ex shares fell 5p to 139p with Chubb-when-Issued at 203p.

Banks were weak. TSB Group fell 4p to 132p as SG Warburg downgraded by pounds 70m to pounds 155m. Insurers gave ground, with County NatWest making negative noises.

BSG International, the garage and car parts group, edged forward 0.5p to 64.5p. SNC expects profits this year to climb from pounds 11.1m to pounds 15.5 with pounds 19.5m pencilled in for the following year. It rates the shares a buy.

Merrydown Wine tumbled 43p to 258p following a cautious statement to shareholders. Metsec, a building and engineering group, retreated 27p to 97p as losses increased.

The brewer Joseph Holt jumped 50p to 2,425p following results.

Shares fell back yesterday. The FT-SE index closed at its low point of the day - down 41 points at 2,560. The decline was matched by the FT 30-share index, which lost 40.9 points to 1,873.1. Trading was subdued, with share volume put at 487.6 million from just under 22,000 bargains. Longer-dated government stocks gained almost half a point

LVMH, the French group, has at last returned its shareholding in Guinness to 24 per cent. It picked up 11 million shares yesterday at 555p, thereby restoring ground lost through options and loan stock conversions. The two groups have a 24 per cent cross- shareholding arrangement. Guinness shares fell 12p to 540p and could go lower now LVMH has made its move.

Another leading group is getting a New York ADR listing. Enterprise Oil said yesterday it planned to offer 6.75 million ADRs, each representing three shares, accounting for 5 per cent of its capital. The group is also offering US investors more preference shares, bringing the amount raised in two preference issues to dollars 300m. Enterprise shares held at 412p.