MARKET REPORT: Food retailers lose weight over fears of a price war

The threat of a superstores price war had the predictable cut- price impact on shares of food retailers as the stock market decided they should give up more of their recent strength.

There is considerable debate about whether an old-fashioned, no-holds- barred confrontation will actually emerge. Most observers think such a development unlikely.

But J Sainsbury could be the catalyst for the feared wave of price cuts. Its dismal trading performance has to be arrested and although it is not a natural price cutter its desperation to recapture its top position could provoke it into adopting a much meaner pricing policy.

Such thoughts left food retailers in need of sustenance.

Sainsbury fell 9p to 332p in busy trading; the shares were at one time down 11.5p. Safeway lost 13.5p to 376p and Tesco 5p to 355p.

Budgens retreated 1p to 43.75p and WM Morrison slipped 1.5p to 151.5p. Asda, the day's busiest traded share, dropped 1.25p to 120.25p and Kwik Save suffered a 6.5p decline to 300p.

The rest of the market appeared to recover from its panicky retreat on Friday and Footsie ended an insignificant 6.8 points lower at 4,212. The supporting FTSE 250 index lost 4.9 to 4,593.1.

Drugs remained one of the healthier sectors. What could be regarded as unrealistic takeover rumours continued to circulate with SmithKline Beecham again leading the charge with an 11.5p gain to 874p.

Roche, the Swiss group, is never far from the takeover rumour mill and remains a candidate to link with SmithKline, albeit through an agreed deal rather than a hostile bid. Schering-Plough, a US group, has also been drawn into the speculation. Zeneca remains in the frame, edging forward 8.5p to 1,693.5p.

Glaxo Wellcome added 8.5p to 957.5p on Aids drugs development hopes and Xenova, forging a research link with US giant Bristol-Myers Squibb, jumped 25p to 295p. The shares have had an eventful ride since arriving last month at 215p and falling to 193.5p before rallying.

Rentokil Initial was the best- performing blue chip, improving 10p to 452.5p, a peak. Others in form included Imperial Chemical Industries, Orange and, once again, Hanson.

Cable & Wireless, an investment presentations due, edged forward 2.5p to 480p. and Vosper Thornycroft rose 7.5p to 936p on hopes of a pounds 700m United Arabs Emirates order.

Newman Tonks jumped 29p to 280.5p as Ingersoll-Rand, the US group, produced a near 180p cash offer, topping the shot from the FKI engineering group.

Norbian, a closed circuit television group, provided the day's profits shock, crashing 106.5p to 332.5p.

English National Investment Co continued its remarkable progress, gaining 26.5p to 257.5p. The Joseph Lewis vehicle has jumped 134p since it was disclosed it had an option on his 25.1 per cent pounds 40m stake in Glasgow Rangers.

Lanica Trust was another in demand. The high flyer, which touched 2,050p last month, rallied 162.5p to 1,737.5p as rumours continued to buzz that Andrew Regan, the young entrepreneur in command, has a number of intriguing deals up his corporate sleeve.

Prism Leisure, the computer games group, rose 15.5p to 140.5p. Half-year figures, followed by the first meeting with analysts for some time, are expected later this week. Profits last year were pounds 2.1m with pounds 684,000 coming at the interim stage.

John Lewis of Hungerford, no relation to the stores and supermarket partnership, made a firm debut. The furniture company ended at 3.75p against a 3p placing.

Chelsea Village, the football club, gained 4.5p to 123p. It followed up its on field exploits by placing a further batch of shares. Through its stockbroker Ellis & Partners 1 million were sold at 120p. As in the past the Ellis fee was met by the issue of shares - this time 25,000.

The club has also agreed to issue 126, 532 shares to captain Dennis Wise at 118.5p and another 500,000 are earmarked for Graham Bell, who has helped develop the club's youth team. He is taking up 250,000 at 106.5p.

Takeover hopes returned to lift SR Gent, the clothing supplier to Marks & Spencer, 6p to 56.5p.

Two bidders are said to be in the wings - one of them an Indonesian company.

Another where takeover hopes hover, United Energy, rose 2.5p to 24p. There is talk of bids and a tender offer.

Taking Stock

Rowlinson Securities, a low-profile but successful building and property group, is rumoured to be in a predator's sights. The shares, a narrow market, rose 30p to 227.5p, a peak. They were 123p in the spring. Based at Stockport the company is run by the Rowlinson family; any takeover would need the family's say-so.

Aminex, with oil interests in the former Soviet Union, was little changed at 65p. Deutsche Morgan Grenfell has placed, through Henderson Crosthwaite, its 6 per cent shareholding.

Intriguing goings-on at National Home Loans Holdings. The shares rose 2p to a closing peak of 145.5p. But in late trading a flurry of delayed deals went through at 148p. Volume was strong; 2.4 million shares.