Market Report: Electricity companies provide a little sparkle

AN ELECTRICAL surge helped the stock market to continue its tortuous recovery, the FT-SE 100 index ending with a 9.1-point gain at 2,909.

The regional electricity companies were encouraged by thoughts that the industry regulator, Professor Stephen Littlechild, was likely to display a much lighter touch than had been expected when he publishes his plans to cut distribution charges in August.

Early signs indicated a tough approach. But a confidential letter sent to the 12 regional companies on Friday prompted speculation that he may adopt a more relaxed stance.

This optimism has been reinforced by the behaviour of the electricity companies that have reported this week. Dividend increases have been above expectations and trading comments quite encouraging.

'The feeling is that no way would they be behaving like this if they faced ruin in August,' said Douglas Falconer at Yamaichi, the Japanese securities house.

It was enough to produce double-figure gains throughout the sector with Northern Electric, figures today, up 23p to 647p. However, not much of the joy filtered through to water shares which face their own regulatory high noon next month.

The rest of the market started well but lost its way as New York failed to build on its overnight advance and government stocks could not hold early gains of about pounds 1.

The confidence generated by the Treasury's summer economic forecasts and the accompanying comments by Chancellor Kenneth Clarke was overwhelmed by renewed inflation and interest rate fears prompted by the latest US statistics.

Even so, some dealers detected a firmer undertone. There was talk of a little institutional buying and trading was the busiest for more than a week.

Boots firmed 7p to 527p following an investment presentation and Grand Metropolitan, displaying its US food operations to analysts, put on 13.5p to 393.5p on rumours that NatWest Securities had decided not to cut its profit forecasts. Last week a number of investment houses lowered their estimates.

Whitbread fell 4p to 496p on UBS sell advice.

George Wimpey, the builder, lost an early gain, closing at 167p. S G Warburg lifted its profit forecast from pounds 40m to pounds 50m but it prefers Tarmac, up 2p at 147p.

Wellcome had another run, up 9p at 611p, as the takeover excitement created by a US securities house continued. BAT Industries rose 11p to 400p on its insistence that it intends to press ahead with its dollars 1bn US tobacco acquisition and Rothmans put on 14p to 360p, apparently on yield considerations.

Racal Electronics climbed 10p to 227p following news of two contracts for its messaging facilities. BOC fell 10p to 683p on the departure of its finance director Ian Clubb, whose new duties will include the chairmanship of Tiphook, the hard-pressed container leasing group.

Clinton Cards, the retailer, caused dismay with a warning of significantly higher interim losses, leaving the shares 31p lower at 105p. The market had been going for year's profits of pounds 3.3m, but the new figure is pounds 2.5m. The warning hit greeting card producer Fine Art Development, down 23p at 504p.

Newspaper shares continued to recover. The Telegraph moved ahead 25p to 385p against the 309p low touched following news of the Daily Telegraph's price-cutting campaign. United Newspapers gained 5p to 503p and Daily Mail & General Trust 48p to 1,348p. Mirror Group Newspapers shaded 2p to 126p.

Johnston Press, a provincial newspaper group riding near its peak at 650p ahead of the Telegraph move, fell a further 25p to 583p.

As the battle for Lasmo edged towards its climax the market continued to take the view that Enterprise Oil's offer would fail. Lasmo held at 141p and Enterprise gained 8p to 408p.

Dixons, the electrical retailer, remained under pressure ahead of next week's results. The shares fell a further 3p to 176p.

Etonbrook, a property group, held at 106p. Panther Securities, an unquoted property company which is coming to the market, plans to bid for full control.

Stockbrokers John East & Partners and Shaw & Co are placing nearly two million Panther shares at 90p. Panther, which already, in effect, has control, is lifting its Etonbrook stake to 50.04 per cent.

Furlong Homes, a house builder, is the latest planned addition to the growing 535 market. Shore Capital and Corporate is hoping to raise pounds 2.3m by placing shares at 100p. British Land will have a 5 per cent interest. Furlong was taken over by The Bestwood in 1987 with the original directors buying it back from The Bestwood's receivers four years ago.

Tullow Oil, up from 19.5p this year, edged 0.5p higher to 43p. Tim Tickler, at stockbroker Teather & Greenwood, is enthusiastic about its Pakistan exploration. Tullow 'has assets that will be the envy of others'. He expects it to quickly announce further finds in Pakistan as the best defence against any unwanted predator is fully valued shares.

The FT-SE 100 index edged forward 9.1 points to 2,909 and the supporting FT-SE 250 index rose 20.8 to 3,384.2. Turnover was 729.3 million with 23,613 bargains. The account ends on Friday with settlement on 11 July.

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