Market Report: Dull session benefits from some Low-key impetus

STORIES of new developments over William Low, the Scottish supermarket chain that has been forced into takeover play, provided much-needed sustenance for a featureless stock market.

J Sainsbury, which has requested and received privileged information from Low, is, some believe, likely to disclose its intentions today. It put itself in the bid frame following last week's surprise 225p-a-share offer from Tesco, which has the support of the Low board.

Most supermarket observers regard the Tesco offer as far too low. But whether Sainsbury will be able to summon the courage to mount a counter-offer remains uncertain. After publicly declaring its interest it could find it difficult to fade quietly away from the action. But it is thought reluctant to become involved in a contested takeover.

Even if it fails to surface with a counter-offer the market has found little difficulty producing a range of other possible rivals to Tesco. Dunns, the Irish group, was drawn into the frame alongside Kwik Save and its near-30 per cent shareholder, Dairy Farm of Hong Kong.

Rewe of Germany, which owns 27.2 per cent of the Budgens retailing operation, was also being touted as a potential counter-bidder, together with the Continental discounters that have set up shop in this country.

But Shoprite is one discounter with too much - or not enough - on its plate to contemplate any interest in Low. It endured the sad experience of producing another gloomy profit statement, halving to 30p. Earlier this year the shares were 243p.

The rest of the market enjoyed a futures-led bounce with the FT- SE 100 index gaining 17.9 points to 3,095.1 and the supporting FT- SE 250 index joining the advance, up 13.9 to 3,600.9.

Turnover was moderately encouraging with at least one, possibly two, programme trades helping to swell volume.

There was talk of a big buyer, thought to be foreign, setting the futures pace, allowing the market to overcome the cautious comments by Alan Greenspan.

British Steel was strong, firming to 158.5p, around its best level since the 1988 flotation. The shares have moved ahead as an array of analysts lifted their profit forecasts, largely on currency considerations. But higher steel prices are also being factored into the upgradings.

Barclays de Zoete Wedd is a member of the British Steel fan club. Its analyst Mak Dichlian looks for profits of pounds 425m this year, pounds 650m next and a remarkable pounds 930m for 1997. Dividends could improve from 2p to 7.5p in 1996.

'We still believe the momentum is firmly upwards and there is scope for further upgrades in the future,' Mr Dichlian says.

Banks remained unsettled by the latest evidence of a banking war. Royal Bank of Scotland dropped 12p to 384p as a large line of stock hovered. Insurances were mixed, with the signalled Commercial Union rights issue again ruffling sentiment. CU fell 8p to 553p.

Financials, strong recently on the improved market atmosphere, ran into profit-taking but Jupiter Tyndall, buying the fund manager Queen Anne's Gate Asset Management for up to pounds 10m, gained 2p to 289p.

The newcomer Ideal Hardware stretched to 253p from a 225p issue price. Johnson Matthey, seeing stockbrokers, put on 11p to 591p.

Eurotunnel added 10p to 294p on hopes that the shares will be included in the main Paris stock market index. British Airways slipped 3p to 431p over worries about its USAir associate.

Oils were strong, with British Petroleum up 2.5p to 408p and Shell, helped by a Nomura recommendation, up 14p at 736p.

Marks & Spencer gave up 6p to 425p, responding to 'switch into Great Universal Stores' advice from Smith New Court. GUS managed a 4p gain to 595p.

Wellcome lost 10p to 605p on its figures, which were in line with most estimates. Celltech gained 18p to 209p following its link with Merck, the US group, to develop an asthma drug.

Booker, the food group, lost 11p to 418p after NatWest Securities said the shares were overpriced. It expects interim profits to fall, with the full-year performance showing little earnings growth.

Lex Refrigeration surged 60p to 355p as the oft-rumoured takeover bid duly materialised from Sime Darby, the Far Eastern group.

But Holder Technology slumped 32p to 147p following a profits fall.

The FT-SE 100 index gained 17.9 points to 3,095.1 and the FT-SE 250 index 13.9 to 3,600.9. Turnover was 607.6 million shares with 23,521 bargains logged. Government stocks were little changed, as unchanged German interest rates came as little surprise.

Waterglade International, the troubled property group, has shelved refinancing plans as shareholder unrest has erupted. Three shareholders with 12.9 per cent are seeking to unseat the board, headed by David Cunningham. He says it is not certain the group's banks will support the planned restructuring without the existing directors. Waterglade languishes at 2.5p.

Interesting goings on in the shares of Racal Electronics, with the spectre of a bid from Cray Electronics hovering once again. There was talk of plenty of inquiries but little buying action as the shares edged ahead 5p to 246p. Some believe Racal's involvement with the Camelot lottery operation is sufficient to deter a Cray takeover bid. Cray rose 3p to 174p.

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