Market Report: International stocks make strong showing

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SHARES enjoyed their second big bounce this month as the stock market responded to the dramatic ERM developments.

At one time the FT-SE share index was up almost 100 points. It ended with a 51.2-point gain at 2,422.1 worth, according to Datastream, an additional pounds 9.4bn to share values. Government stocks achieved gains of about pounds 2.

International stocks, particularly where there is a strong US influence, led the advance as the dollar continued to strengthen on the foreign exchange market. New York's early strength underlined the relief over the dollar's revival.

Hopes that the German interest rate cut, albeit a modest 0.25 per cent on the Lombard rate, will relieve pressure for higher UK rates helped interest-sensitive shares such as builders, brewers and retailers.

Yesterday's advance was not as forceful as the 68.9 points scored when the ECU loan package was announced earlier this month.

And trading volume, although the best Monday performance for two months, was again unimpressive. But, reflecting a sudden awakening by small investors, more bargains were struck than during most recent sessions.

The smaller investor was, apparently, prepared to bank on some of the more bombed-out stocks staging a strong recovery.

Although most institutional investors remained uncertain about the course of the market and kept on the sidelines, there was a growing tendency in some quarters to wonder whether the worst of the 1992 bear market was over.

The weekend package is seen as taking the pressure off sterling until the French referendum on Sunday, and if Maastricht is approved it is felt UK interest rates will be lowered and the scene set for shares to stage a strong last quarter display, a not unusual event.

The latest advance follows Friday's 30.3-point gain, spurred largely by the first signs of a dollar revival. Not surprisingly, Friday's performance has prompted mutterings about the possibility that some operators got wind of the weekend's events.

Internationals such as Glaxo Holdings, up 22.5p to 790p, Guinness, 16p to 533p, and Reuters, 26p to 1,144p, led the charge. Computer group Micro Focus, which has a powerful US following, spurted 128p to 1,888p.

United Biscuits, which has experienced difficult trading in the US, continued to recover, rising 17p to 276p.

RMC jumped 23p to 436p and Redland 24p to 357p. Both have extensive German interests.

But for a variety of reasons some failed to join the fun. Kwik Fit, the tyres and exhausts group, was deflated 13p to 96p on its interim setback and ice cream maker Clarke Foods melted 43p to 21p (after 13p) as it pulled its dividend.

Hillsdown Holdings, with 8.3 per cent of Clarke's equity and all its preference shares, dipped 3p to 82p. Hillsdown's gets its preference dividends by taking up more preference shares.

Queens Moat Houses, the hotel group, ran into further selling, falling 5p to 36p. Bearish comments from Greig Middleton overshadowed its significant German operations and the lower cost of its DM borrowings.

Imperial Chemical Industries, which could have been expected to join fully in the advance, was subdued, managing a mere 4p gain to 1,074p. The shares were held back by uncertainty over its pounds 350m asset swap with the US Du Pont group.

It was not the sort of climate for safe haven stocks like utilities. Many water and electricity shares ended lower. National Power and PowerGen were hit by profit-taking after last week's heady progress based on hopes they will wring extra profits from their new British Coal contracts. National fell 7p to 254p and PowerGen 6p to 267p.

Securities group S G Warburg jumped 20p to 454p. Stories persist that it plans a significant deal, perhaps with a US securities group. Its decision to drop 362 shares from its market-making book continues to create ripples, with Smith New Court preparing to take on some of the unwanted stocks.

Bikuben-Whitefriars and Winterflood Securities are also likely to make markets in ex- Warburg shares.

Eurotunnel was helped by the lower European interest rates and hopes of a settlement with the TML consortium. The shares gained 18p to 378p. Euro Disney was another to benefit from the improved European interest rate climate, jumping 38p to 903p.

Struggling chemical group MTM failed to respond to director share buying, including a 331,000 purchase by chief executive Ken Schofield. The shares dipped 1p to 28p.

Peter Gummer, chairman of the Shandwick public relations group, continues to pick up shares in his company, although his buying has yet to make much impression on the depressed price. Yesterday it was disclosed that he had added a further 450,000 shares to his collection, making nearly 8.3 million. Last week he purchased 2.6 million. The shares stuck at 4.5p.

Ossory Estates edged ahead 0.5p to 6.5p yesterday as signs of the long-mooted restructuring started to emerge. Christopher Spence is the new chairman, with Norman Turner, the largest shareholder with 6.47 per cent, becoming managing director. Other changes are likely. The Manchester stockbroker John Siddall & Son regards Ossory as an intriguing recovery stock.