Market Report: Holiday mood works down to worst-hit shares

IT WAS the turn of some of the stock market's bombed out shares to take up the running yesterday, as the holiday rally appeared to gather pace.

Building materials, which could be expected to enjoy any early indications that the lingering recession is coming to an end, moved ahead with RMC Group scoring a 24p gain to 484p.

Redland rose 15p to 424p and Rugby Group 12p to 193p. Others higher included BPB Industries 5p to 152p, and Hepworth 7p to 308p.

Builders also managed to make progress, and leading properties joined in. With other interest-rate sensitive stocks making headway, the FT-SE share index rose 19.3 points to 2,376.1. Since the first hesitant revival three trading days ago, Footsie has risen 73 points.

But the advance has been scored in exceedingly thin trading, with yesterday's volume challenging for the lowest of the year. The three-day advance, however, could worry some of the institutions which have spent the summer determinedly sitting on the sidelines as the market has drifted lower.

If they feel they are in danger of missing the long-awaited comeback they could be panicked into moving into the market.

But the paucity of buying indicates just how fragile the current upsurge could be. Many market operators still fret that the revival is nothing more than a dead cat bounce, and some stronger evidence of a move out of recession is needed.

The optimists, however, point to the fall in inflation and better output figures as indications the oversold market is due for a rally.

Food manufacturers once again missed out. Inflation growth has all but disappeared, and any benefits they achieve from improved volume or cost savings is likely to be swallowed by the big supermarkets.

United Biscuits has been hit by a succession of downgradings. The shares fell another 2p to 292p as Hoare Govett reduced its estimate by pounds 10m to pounds 185m. Last year UB achieved pounds 211.3m.

Barclays de Zoete Wedd waded in, hitting Cadbury Schweppes and Hillsdown Holdings, and UBS Phillips & Drew was said to have cut Associated British Foods.

Cadbury fell 4p to 437p and Hillsdown 2p to 118p. ABF edged ahead 1p to 391p.

As if to underline the continuing retailer strength, Argyll Group firmed on an institutional visit.

London International Group, sadly out of favour, bounced 10p to 199p as SG Warburg made positive noises. Hoare Govett also likes the shares which have been as high as 316p this year. The condom and photo- processing group is thought to be reaping benefits from recent management changes.

Demerger stories failed to have much influence. Indications Cable and Wireless could be planning a flotation for its Mercury telephone off-shoot left the shares unchanged at 520p. Trafalgar House, where there is talk of a leisure float, managed a 1p gain to 58p.

The Albert E Sharp and Yamaichi engineering reviews helped sentiment. Siebe improved 27p to 631p.

Guinness jumped 16p to 523p. There is talk that LVMH, the French group, could soon attempt to rebuild its stake to 24 per cent, diluted slightly by recent share issues. The two groups have agreed a 24 per cent cross shareholding.

On the drugs pitch, Wellcome edged forward 4p to 791p and Glaxo Holdings, figures next month, was helped by a Warburg recommendation, up 12p at 724p.

The encouraging statement from Argos helped other retailers and tended to disperse the gloom produced by the confederation of British Industry survey. Kingfisher rose 14p to 453p.

Micro Focus, the computer group with a big US following, had an eventful session. Early progress was quicklty wiped out and the shares ended 42p lower at 1,453p, a three-year low. Interim figures are due today. County NatWest is looking for a 17 per cent advance to pounds 10.5m. Ossory Estates held at 4.5p as the Prudential Corporation sold and entreprenurial investor Bob Morton lifted his interest to 4.3 per cent. He has also moved in on Silvermines, the Dublin engineering and building group, picking up a 5.4 per cent stake.

H Young Holdings, which distributes electronic components and optical lenses, held at 39p as the Peter Cundill Canadian investment group, which specialises in buying into what it regards as special situations, lifted its shareholding to 9.3 per cent. The company's interim profits were up from pounds 377,000 to pounds 427,000.

The FT-SE share index closed at its best level of the day - up 19.3 points to 2,376.1. The FT 30 share index was up 12.4 to 1,766.2. Trading volume was again low. Seaq put turnover at only 315.3 million shares with a mere 17,414 bargains recorded. Governmment stocks edged forward.

Shares of Spring Ram were up 3p to 128p yesterday against a year's high of 181p. The bathroom and kitchen group is 'quite the safest investment in the building materials sector', the stockbroker Greig Middleton says. It forecasts profits up from pounds 37.6m to pounds 42m this year. The shares were 3p a decade ago, analyst Michael Foster points out.

Hartstone Group, down 6p to a new 1992 low of 123p, could be set for a bounce. Yesterday Wise Speke issued a buy recommendation and there are suggestions that two other bullish notes have been prepared. Wise Speke is looking for profits this year of pounds 38m against pounds 22.1m. The shares, it says, have suffered but 'fundamental trading prospects are good'.

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