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Market Report: International row rings up 10p loss for BT

Derek Pain
Friday 16 April 1993 23:02 BST
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THE CLASH of the telephone titans rang round the stock market yesterday as shares in BT tumbled 9.5p to 411p.

Since the outbreak of hostilities with AT&T, the US telephone giant, over international services became known on Thursday, BT shares have fallen 15.5p in often brisk trading.

AT&T has called upon the US authorities to ban BT from conducting international operations from the US until it is given government clearance to compete with BT in the UK.

Cable and Wireless, the Mercury group, has also been caught in the struggle of the airways, falling 13p to 729p.

But it is the performance of BT shares that will capture Whitehall's attention. The third BT share issue is already being prepared, with the sale expected in the summer.

For a government with a huge borrowing requirement every penny counts. And the decision to set up a syndicate of 11 global managers to sell the third tranche is seen as an example of the Government's determination to pull in as much cash as possible from the sale. The need to fund borrowing is already creating speculation that investors will be asked to pay the full price for shares at the time of flotation, instead of, as in earlier sales, being allowed to pay by installments.

It is expected that the Government's remaining 22 per cent will be sold, which could raise about pounds 5.5bn - assuming BT's shares are not too tormented by the transatlantic tension with AT&T.

The rest of the market expressed disappointment with the higher- than-expected inflation figure, which was seen as pushing still further into the background the possibility of an interest rate cut. But a firm New York opening blunted the retreat.

The FT-SE 100 index ended 15.3 points down at 2,824.4. The FT-SE 250 index fell 3.1 to 3,082.8. On Monday the 250 index will be adjusted for the removal of Queens Moat Houses, suspended at 47.5p, at a nominal price of 1p. Norcros, the building materials group, is the replacement.

In what has been an uneventful three-week account the 100 index has slipped 28.4 in generally quiet trading. With the next account also covering three weeks many observers believe the market will continue to drift, with fund managers finding little incentive to change investment positions significantly.

The latest Pearl investor index showed confidence in the market had risen sharply. But this optimism was offset by a more cautious approach to buying shares (and other products) by consumers.

Utilities remained under pressure from profit-taking. Waters, only last week at unprecedented levels, again suffered sharp falls. Electricities were dull although the English and Welsh generators, National Power and PowerGen, edged forward.

RTZ continued to suffer from the weak copper price. The shares fell 10.5p to 647.5p, the lowest for five years.

P&O dipped 15p to 547p. An EC ruling did much of the damage. Brussels has ordered the break-up within three weeks of a cargo shipping pact, known as the Transatlantic Agreement, because it believes it amounts to an illegal cartel. NFC improved 6p to 247p following a buy recommendation from SG Warburg.

British Steel strengthened its position as one of 1993's best-performing shares. It rose a further 3.75p to 94.75p, at one time touching 96p. Much of the buying came from UK institutions. The latest flurry of excitement stems from BS's decision to implement its second price increase this year.

But doubts whether it will hold continue. Carr Kitcat & Aitken suggested the strength should encourage investors to trim holdings.

Hartstone, the hosiery and leather group, had another poor session, falling to 100p at one time. The shares closed 16p down at 108p. The group has been the subject of a series of bear raids. In February the shares touched 280p. Then as rumours swirled of accountancy problems they were ripped apart. The price has remained unsettled. Hartstone has revealed an pounds 8.5m restructuring, and analyst profit downgradings have added to the gloom.

Oils were mixed. Lasmo's ragged retreat continued, down 5.5p at 142.5p.

Bespak, the medical equipment group, remained friendless, down a further 11p at 550p. Medeva shed 5p to 206p. Credit Lyonnais Laing, looking for profits of pounds 59.5m to be followed by pounds 81m, says the 180p rights issue represents 'outstanding value'. The nil paid rights fell 4p to 26p.

Cannon Street Investments, the mini-conglomerate, was actively traded with its decision to postpone the convertible preference dividend, pushing the shares down 2.5p to 7.75p.

Gibbs Mew, the brewer, fell a further 8p to 215p on the 18 per cent stake sale by Brierley Investments. Hoskins Brewery edged up to 54p as Richard Holman, who has sounded out support for a shareholder rebellion, increased his interest to 7.4 per cent.

On the last day of the account the FT-SE 100 index, at one time down 22.6 points, ended 15.3 down at 2,824.4. Turnover reached 586.7 million shares with 32,516 bargains recorded. The new account covers the three weeks to 7 May with settlement on 17 May. Gilts fell back.

An apparent rift at Castle Mill International is hindering property man Brian Roussell's attempt to revitalise the giftware group. Mr Roussell's plans to assume management control, make an underwritten rights issue and embark on a restructuring do not appear to have the support of the board. But with nearly 25 per cent of the capital the Roussell camp is strongly placed. The shares held at 9p.

Smith New Court believes Spring Ram Corporation's recovery is under way. It is looking for profits of pounds 32.7m this year and pounds 35.6m next. The bathroom and kitchen group failed to meet profit expectations last year and its shares have fallen from a 181p peak to 59p yesterday. SNC believes that when management 'gets its act together the potential of Spring Ram is considerable'.

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