Market Report: Inflation fears and slow US trade dull share gains

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STRONG early gains in share prices yesterday were cooled in mid-morning trading by some inflationary worries from the latest CBI survey and again in the afternoon by a dull opening on Wall Street.

Business and export confidence, the CBI said, increased in the four months to July. Exports were at their highest for six years.

The FT-SE 100 share index, up by nearly 27 points in early trading, closed 11.1 higher at 3,117.2. Gilt-edged stocks were restrained ahead of the pending pounds 2bn auction and recorded falls of around pounds 5 16 across the board.

Volume trading in equities was a sharp improvement on Monday's performance, although the total of 552 million shares turned over included a couple of chunky basket trades.

Second-line export and manufacturing stocks benfited most from the CBI's findings. Notable beneficiaries included McKechnie, which rose 12p to 482p, and Hall Engineering, which jumped 20p to 195p.

There was a lot of talk about pending corporate results - particularly from the clearing banks. Analysts expect the clearers to collectively make more than pounds 4bn of profits for the first half of this year. The season will be opened on Friday by Lloyds Bank, ahead 7p to 567p.

Smith New Court says the improvement in the clearers' operating profits over the past few years will finally gain visibility through the downturn in the bad debt cycle.

Barclays, up 9p to 551p, and National Westminster, up 5p to 470p, are predicted to benefit most from falls in bad debts. Abbey National, which is recommended by SNC, gained 5p to 414p.

Hoare Govett injected some life into food retailers by upgrading the sector. Sainsbury advanced 5p to 411p as speculation subsided that it was on the verge of countering the bid by Tesco, 0.5p easier at 236.5p, for William Low, off 10p to 268p.

The broker's forecast for Sainsbury for 1994/5 has been lifted from pounds 730m to pounds 776m, and from pounds 780m to pounds 825m for the following year.

A pounds 5m rise to pounds 110m in the profit prediction for Wm Morrison Supermarkets lifted the shares 3p to 131p. Argyll added 3.5p to 272.5p.

BAA improved 10p to 994p on positive thoughts about first- quarter figures, which are due on Friday. Recent bullish reports from holiday companies have caused a slight rethink on expectations on the growth in charter airline traffic, which rose by 16 per cent in June alone.

The holiday companies - Thomson, Airtours and Owners Abroad - still have more than 2 million overseas tours left to sell. Flights to North America are also said to be picking up.

Hopes of an end to the long- running Savoy Hotel saga saw Forte firm 4.5p to 231p.

There is some speculation that Forte may try to resolve the current impasse through a deal involving the injection of several hotels into the Savoy Group. This would create better marketing and purchasing opportunities for the struggling up-market Savoy group.

Shares in Savoy touched 975p at one stage, but closed 3p lower at 973p as the asset injection rumours dampened hopes that Forte would mount a full bid.

Yesterday's casualty list numbered Whessoe, which dived 26p to 108p on a profits warning. Shares were tipped in some Sunday newspapers as a recovery play.

Umeco, supplier of aircraft refuelling equipment, will be the first to take advantage of the Stock Exchange's relaxation of rules for companies wanting to move from the USM to a full listing. Shares firmed 1p to 51p.

Gibbs Mew, the brewer and pub operator, is expected to follow suit soon and rose 8p to 400p. A buy recommendation from James Capel pushed Greene King 7p higher to 482p.

First-day dealings in Panther Securities were lively. Placed at 90p, the shares closed at 95p while the one-for-five warrants finished at 12p - equating to an 8 per cent premium.

Equity prices came off the boil towards the close. The FT-SE 100 index, which was 26.7 points higher at one stage, finished at 3,117.2, up 11.1. A advance of 17.1 to 3,641.1 was recorded by the FT- SE Mid. Gilts were easier ahead of the pending pounds 2bn auction.

Investors piled into Waverley Mining yesterday in anticipation of good news from drilling reports on a couple of gold mining prospects later this week. Of particular interest are the company's Perseverance Corporation subsidiary in Australia and Montague Gold, the offshoot that has a 65 per cent stake in a joint venture in Alaska. The shares climbed 9p to 63p.

Morgan Stanley took the knife to full-year forecasts for WEW, the Glasgow-based chain of discount stores. The downgrade follows the company's report of poor second-half trading and a warning it would have to make provisions for excess stocks, which include Sega games. Morgan has sliced more than a fifth off its forecast to pounds 5m pre-tax. Shares languish at 34.5p, a level last seen in 1992.

Scantronic's shares suffered a backlash from Monday's after-hours bombshell. The resignation of the finance director, a warning that shareholders could forget about a dividend cheque, and a sharp rise in debts from pounds 7.6m to pounds 11.2m were too much to bear. Shares in the supplier of security alarms dived 20p to a three-year low of 28p. About 1.5 million shares were traded.

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