Market report: Footsie powers ahead as buying frenzy continues

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The Independent Online
THE DEVALUATION share-buying spree sent the FT-SE index storming ahead another 83.1 points to 2,567 yesterday.

In the two days since sterling was allowed to float free from the shackles of the ERM the index has bounded ahead 188.7 points in some of the most frenetic trading the market has experienced.

Although caution about the French referendum and the temptation to take profits during afternoon trading pulled prices from their best levels, the overwhelming weight of the day's activity remained on the buy side with, for the first time for months, heavy new time buying for the next account.

Share turnover reached 1,298.1 million - not quite as high as on Thursday. In two days volume has reached nearly 2.7 billion. If the activity on Wednesday, when rumours of devaluation surfaced, is added to the total the market has in three days almost turned over more shares than in some of the lacklustre accounts that have been a feature of trading since the 1987 crash.

Interest rate expectations kept the deals flowing. There are hopes of further cuts, perhaps in the new account. Talk of an 8 per cent base rate before the year-end is strong. There is even optimism in normally reliable quarters that before the UK flirts again with the ERM, assuming the system survives, base rates will be down to 6 per cent.

Barclays de Zoete Wedd is one securities house predicting 8 per cent base rates by the year-end. But it is less enthusiastic about shares, keeping its Footsie estimate at 2,600.

Among the institutions Norwich Union, which appears to have largely abandoned the cult of the equity, seems to be taking advantage of the market's strength by reducing its shareholdings.

John Mowlem, the builder, and Scottish & Newcastle, the brewing and holiday centres group, are the latest where Norwich has dropped its interest below 3 per cent.

On top of the interest rate expectations, inspiring the likes of builders and retailers, the benefits of a lower pound continued to entice buyers.

International stocks were again in demand, with Imperial Chemical Industries up 32p at 1,137p. At one time the shares were up 45p. But suggestions that Goldman Sachs was continuing to dribble out shares it purchased from Hanson, and rumours that ICI planned a 10 per cent chemicals price increase, curbed enthusiasm.

One big placing did occur. Rumour at last became reality when the insurance group Sun Alliance placed, through Cazenove and Smith New Court, most of its 14.3 per cent shareholding in the rival Commercial Union. About 60 million shares were placed among institutions at 475p.

Sun Alliance acquired most of its stake from Adelaide Steamship, the then-booming Australian conglomerate, at 465p a share in 1989. Its shares rose 10p to 273p but CU held at 489p.

British Petroleum again missed the party. In heavy trading the shares ended just 2.5p higher at 214.5p. Hopes of higher crude prices spurred other oil stocks.

Guinness, too, had a subdued time. Currency advantages were ignored because of the group's cautious trading statement. The shares ended 10p down at 524p.

Tate & Lyle, the sugar group, rose 7p to 343p, partly reflecting the increased 6.8 per cent shareholding of the US group Archer-Daniels-Midland International.

Argyll Group, the Safeway chain, drew strength from positive BZW comments, gaining 20.5p to 327.5p.

The chemical group Courtaulds gained 29p to 475p, reflecting Smith New Court enthusiasm. Bowater, the electrical group, rose 5p to 244p with Hoare Govett saying the shares were undervalued.

Thorn EMI threw off an early setback, ending 27p higher at 720p.

Banks continued to make headway. Standard Chartered advanced 11p to 438p, with BZW lifting its profit forecasts from pounds 180m to pounds 210m and from pounds 290m to pounds 325m.

City Site Estates had a difficult session as it said it would not pay dividends due at the end of the month on its preference shares. The ordinary shares collapsed 15p to 9p. The company did, however, report that it hoped to reorganise its capital to allow dividend payments, and rental income was running higher than interest payments.

Huntleigh Technology, the healthcare group, moved 12p higher to a 650p peak ahead of interim results due next week. About pounds 2m is expected.

The management consultant P-E International slipped 2p to 52p as it reported interim profits of pounds 514,000 against pounds 1.83m.

Shares turned in another heroic performance, with the FT-SE share index closing up 83.1 points at 2,567. At one time it was 93.8 higher. The FT 30 share index was 60.6 better, at 1,875.8. Turnover reached 1,298.1 million with 42,638 bargains. The Government issued pounds 500m of index-linked stocks.

It looks as though the so-called Gloucestershire Farmers consortium is still rolling over most of its 6.5 million shares in Mirror Group Newspapers. The GF has rolled over its shareholding, thereby deferring payment, three times, and a large slice was rolled again yesterday. It seems, however, that some of the stake may have been sold. MGN shares held at 56p.

Sears was one of the more sluggish retail performers yesterday, edging ahead just 1p to 64p. County NatWest is bearish. The possibility of exceptional costs of up to pounds 80m increase the risk of the year's dividend being halved, it suggests. But County believes the interim, due in the next account, will be held at 1.525p. Half-year profits are forecast at pounds 23m against a pounds 2.9m loss.

(Graph omitted)

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