Market Report: European rate cuts give London a boost

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The Independent Online
THE TANTALISING scent of lower interest rates wafted around the stock market yesterday. More European cuts and expectations the Bundesbank could feel under pressure to nudge German rates down at Thursday's meeting pushed shares higher, with blue chips turning in a particularly strong performance.

A German cut could, it is felt, leave the way clear for UK rates to be reduced, possibly in the next month or two. The optimistic mood was helped by suggestions that the new Chancellor, Kenneth Clarke, will, in this evening's Mansion House speech, offer some encouragement to the growing clamour for lower rates.

The FT-SE 100 index rose 23.7 points to 2,885.5, its highest for nearly three months. And the supporting FT-SE 250 index hit yet another peak, up 10.3 to 3,213.2.

Turnover was modest. Trading was squeezy, with the market often short of stock. Once again there was a considerable futures influence.

Fisons, the pharmaceutical group, suddenly returned to favour. In busy trading the shares climbed 6.5p to 161.5p. The Swiss Ciba-Geigy group was said to be preparing bid action, encouraged by Fisons' apparent vulnerability. Some were convinced the activity merely stemmed from dividend buying - the shares yield nearly 7 per cent - while others pointed to the launch of Tilade, an asthma drug, in the US.

Despite the flurry Fisons shares remain in the sick bay. Last week they hit 149p, lowest for years. In 1991 the price was 515p.

The group has suffered a succession of setbacks with profits tumbling. New management is striving to resurrect its fortunes but is clearly finding the going tough.

Even the success of Tilade has turned out to be a non-event. In April, Fisons caused dismay when it abandoned another asthma drug, Tipredane, and last week humiliation was heaped on when it lost its FT-SE 100 index membership.

Zeneca was another drugs group to draw comfort from the US. The FDA approved its Zestril heart treatment. But perhaps more important is the fact that the US Securities and Exchange Commission has ended worries over underwriters' support for the pounds 1.3bn rights issue.

Under SEC rules underwriters would not be allowed to buy Zeneca shares in the last five days of the issue. However, the US authorities have waived this restriction but blocked US groups involved in the issue from buying nil paid rights for sale to US investors. Zeneca's five- day countdown starts today. With the shares up 1p at 617p and the nil paid at 17p, the US intervention, announced after the market closed, could be the difference between the success and failure of the cash call.

BT3 left the existing BT shares up 10.5p at 423.5p. Utilities were helped by the signs of a dividend race.

Great Universal Stores non-voting 'A' shares edged ahead 7p to 1,690p. Carr Kitcat & Aitken say the 'eventual break-up of the group would appear to be drawing nearer'. A realistic valuation would be about pounds 23.20p a share, it adds.

British Gas rose 4.5p to 297p on the threatened job cuts if it is forced into a reshaping by the Monopolies and Mergers Commission.

A Shell presentation, outlining cost savings, lifted the shares 5p to 625p and Unilever, holding an investment conference today after one in the Netherlands on Friday, rose 13p to 1,044p. The textile group Coats Viyella, also making a presentation today, gained 2p to 226p.

Cadbury Schweppes, helped along by an SG Warburg buy recommendation, rose 6p to 465p. United Biscuits firmed to 389p.

Newcomer AG Holdings, the UK's biggest maker of dispatch and shipping reels, traded at 128p against the Henry Cooke Lumsden 125p placing price.

Airtours rose 5p to 323p on the pounds 25m takeover of the Hogg Robinson travel shops and Barr & Wallace Arnold, the coach and hotel group, was again in demand with the voting shares up 50p at 573p.

SelecTV, the Lovejoy TV group, held at 23.5p as Daily Mail & General Trust disclosed it had lifted its interest to 9.22 per cent. Clayform, the property group, held the 26p after-hours price hit on Friday when Martin Landau became deputy chairman and took a stake.

The FT-SE 100 share index, at one time up 29.8 points, ended with a 23.7 gain at 2,885.5. The FT-SE 250 index was 10.3 higher at 3,213.2. Turnover was 500 million shares with 29,297 bargains. The account ends on Friday with settlement on 28 June. Gilts improved.

Comac, a computer recruitment group, jumped 25p to 69p. Philip Swinstead, founder of the SD- Scicon computer business, has picked up 19.47 per cent and moved in as chief executive. He paid 60p for the shares, buying from HIT Investments, part of the Hillsdown Holdings group. Another 10.52 per cent was placed with institutions at 60p. HIT still has 16.29 per cent.

Stratagem Group, currently stalking door maker Harrison Industries, had a busy session, It announced profits for the year to end- February of pounds 162,000 against a loss of pounds 221,000, changed its stockbroker from Kleinwort Benson to Panmure Gordon and held an institutional lunch at Henderson Crosthwaite. The shares, though, were unmoved by this flurry of activity, holding at 120p.

Expect developments at United Energy, the oil exploration group that has yet to live up to the hopes of its supporters. It has made a modest addition to its US operations, adding 55 barrels a day to output. More significant deals are in the pipeline and should be announced soon. The shares topped 60p 18 months ago. Last year they fell to 12p. The price yesterday was unmoved at 27p.