Market Report: Fears of long bear run squeeze trade

THE STOCK market had its quietest day for more than 18 months yesterday as the worrying suspicion that it could be in for a long bear run kept buyers on the sidelines.

With only 274.8 million shares traded against a break-even level of 500 million, the FT-SE index drifted 28.1 points lower to 2,469.

There was not much selling. It was the near-total absence of any realistic buyers that depressed the atmosphere and left many wondering whether the post- election euphoria will be followed by the Footsie drifting down to 2,200.

The lingering recession and the impact it is having on earnings and dividends is forcing a sucession of downgradings, and although many regard equities as oversold most year-end Footsie forecasts are being pulled back.

The slump in share trading, apparent in recent weeks, is creating considerable anxiety that another heavy round of redundancies will soon be under way, replacing the current policy of gently eroding staffing levels.

The depression savaged every sector, although the hotel and leisure area was among the hardest hit.

Forte, following the abandonment of its contract catering sale to Compass Group and ARA of the US, was at one time down to 173p. The shares ended at 178p, lowest closing level since 1987.

The agony of the contract catering fiasco was compounded by a profit downgrading by the company's broker, UBS Phillips & Drew. Analyst Paul Heath cut this year's forecast from pounds 125m to pounds 86m and next from pounds 200m to pounds 135m.

Industry forecasts showing hotels trading at their worst levels for 12 years with occupancy 9 per cent below last year merely added to the discomfort.

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Compass closed at 443p - 46p below the level it was suspended at when the talks started.

Others weak included Queens Moat Houses, down 2.5p to 70.5p, and Euro Disney, 23p lower at 1,043p.

Rank Organisation was also unsettled, off 20p at 623p. The market is growing increasingly restless ahead of interim results, due on Thursday.

The group's apparent failure to sell its hotel portfolio is damaging sentiment, with nagging fears of a rights issue not far below the surface.

Thorn EMI retreated 17p to 773p. Barclays de Zoete Wedd downgraded, cutting from pounds 340m to pounds 320m and pounds 390m to pounds 370m.

Ladbroke Group, with a 1p rise to 203p, resisted the downward pull. Smith New Court provided the comfort. It suggested that worries over the group's property portfolio were exaggerated and 'yield is particularly attractive and the financial position remains strong'.

Wellcome was another blue chip to buck the losing trend. The shares rose 6p to 883p as the debate about the planned pounds 3bn flotation continued.

Union Discount slumped 51p to 64p (after 48p) following the loss and the container group Tiphook dropped 57p to 330p on disappointment with its results.

Imperial Chemical Industries retreated 35p to 1,139p as the market continued to fret about the overhang from Goldman Sachs. The US house acquired Hanson's 2.8 per cent interest at l,400p a share. It still has many of the shares on its books.

BAT Industries dipped 6p to 732p despite a 100-page tome from Smith New Court suggesting the shares could be worth 900p.

Profit downgradings continued to haunt Guinness, although prospects of the French LVMH group buying to regain its 24 per cent level left the price only 1p lower at 533p.

Yamaichi, the Japanese investment house, did not help sentiment by dumping the stock from its top ten share portfolio. Guinness was only elevated to top ten status last month.

The Yamaichi rethink follows meetings with the company which prompted the securities house, like others, to reduce its profit estimates. It has cut from pounds 1,035m to pounds 1,010m and pounds 1,162m to pounds 1,132m. Allied-Lyons, down 3p to 627p, has the somewhat dubious distinction of replacing Guinness in Yamaichi's top ten.

Little Hoskins Brewery, based in Leicester, rose 2p to 33p. Richard Cattermole has built a 3.8 per cent stake. His Ryan Elizabeth Holdings runs 50 hotels and pubs in East Anglia and his presence on the Hoskins share register is bound to create speculation that he wants bring Ryan to market through a reverse takeover.

Barrie Hoar, Hoskins' chairman, and his family, account for about 30 per cent of capital.

AB Electronics improved 12p to 90p. TT Group has 6.3 per cent and is talking about a merger, but it looks more likely that a bid will be made. TT fell 7p to 215p.

The FT-SE share index retreated 28.1 points to 2,469 yesterday. At one time it was 34.1 lower. The FT 30-share index fell 24.5 points to 1,891. Trading was pathetically thin, with only 274.8 million shares traded. Bargains failed even to reach 20,000, with just 19,491 recorded. Government stocks were weak

British Land suffered yesterday, dropping 11p to 175p at one point before recovering to close at 183p. The company is exposed to the fortunes of the troubled Gateway retailing chain, owning 37 of its supermarkets, a distribution centre and its Bristol headquarters. It is estimated that Gateway, owned by the unquoted Isosceles, accounts for pounds 10m of British Land's rent roll.

Automated Security (Holdings) is seeking a full New York listing, a year after achieving a Nasdaq presence. The security systems group, headed by Tom Buffett, has 4,000 US shareholders, representing about a third of its capital. Since it arrived on Nasdaq nearly 30 million of its shares have been traded in the US. ASH shares ended 3p lower at 133p.