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Market Report: More index distortions as RMC returns to Footsie

RMC, the building materials group, had the dubious distinction of "celebrating" its return to Footsie with a 12.5 per cent fall.

The shares, as rogue trades were cleared out of the order book, fell 175p to 1,225p.

The ramifications of the RMC debacle do not, however, end with a share price adjustment. It is a development which would have created confusion in some corner of the land should the Monday closing price have been essential for, say, an estate valuation. And the two major stock market indices have been thrown by the maverick RMC trades.

On Monday, as RMC soared on the back of the rogue deals, the FTSE 250 mid cap index was clearly inflated. And yesterday, as the company joined Footsie, the subsequent downward adjustment eroded the closing Footsie calculation of 5,842.3 points, up 4.4.

The index distortions were underlined by the display by Royal & Sun Alliance, the insurance group. The shares, as the market closed, soared on the back of a trade of just 2,500 shares at 700p. If reason had prevailed the closing price would at best have been 674p but more realistically 648p. The fictitious close, which was used for the Footsie closing calculation or for any portfolio valuation, was an unjustified 700p, up 62p.

Daily Mail & General Trust non voting "A" shares have been accorded what is at best the mixed blessing of joining the order book. Trading on the book, which accounts for little more than 30 per cent of the available turnover, starts today. The shares closed 135p higher at 3,135p. The powerful ordinary shares, which control the company, will remain subject to the old market-making system.

The distortion created by the 2,500 Royal Sun sale merely underlines the dangers of the Stock Exchange's decision to remove the minimum size for order-driven deals. There are worries that even a 50-share order could create the sort of havoc which has been evident at RMC and Royal Sun. Few market men believe the minimum deal and other changes announced last week will do much to cure the obvious weaknesses of such an unfriendly system.

CGU, the result of the Commercial Union-General Accident insurance merger which created the RMC Footsie vacancy, ended its first day 27p lower at 1,094p.

The rest of the stock market experienced a lacklustre session. Results helped alleviate the boredom with National Grid and Vodafone enjoying favourable figures.

Lloyds TSB rose 12p to 887p despite profit downgradings from ABN Amro and Schroders on pension misselling. The two houses lowered profit forecasts, in ABN's case by pounds 300m to pounds 3.35bn.

Shell firmed 3.5p to 448p on its proposed Iranian expansion, and the Falkland flyers continued to recover with Desire Petroleum up 32.5p to 322.5p.

Reuters responded to a Lehman Brothers target of 802p with a 7p lift to 713p and Independent Insurance jumped 32.5p to 374p on bid talk.

HR Owen, the upmarket car dealer, purred 2.35p ahead to 17.25p although takeover hopes faded following the sale by Ong Beng Seng, the Malaysian tycoon, of 32.7 million shares. His stake is now 9.9 per cent. The group's chief executive, Nicholas Lancaster, picked up 17.8 million of the shares at 17.25p with institutions acquiring the rest. Mr. Lancaster now has 21.7 per cent.

Bid hopes also evaporated at Filofax, off 17.5p to 161.5p. The company has been talking to would-be buyers since April but a deal has not been concluded.

Bass, Cadbury Schweppes and SmithKline Beecham largely brushed aside the fizzy drinks scare but building shares, on the back of profit upgradings, edged ahead. Newcomer James R Knowles, a construction support group, ended at 96.5p against an 85p placing. But Polypipe fell 16p to 172p after Charterhouse Tilney made cautious noises.

Oasis Stores jumped 28p to 202p following a sales upsurge; More, the advertising group, was little changed at 1,105p as Clear Channel, the US group, finally ended the bid argument by increasing its shareholding to 51.3 per cent.

Geo Interactive Media improved 16.5p to 176.5p as 18 million shares were placed at 145p. The internet software group intends to move from AIM to full listing.

Tricorder, a developer of 3D technology, is moving from Ofex to AIM. It fixed up two contracts, supplying a 3D scanner to an NHS burns unit and a 3D camera to the Victoria & Albert Museum. The company suffered a loss of pounds 868,000.

Powerscreen, the troubled engineer, endured another bruising session, falling 22p to 65.5p; the shares were 762.5p in October.