Market Report: Overseas institutions sound retreat for shares

THE EUROPEAN elections and a new outbreak of inflation and interest rate fears gave shares another nightmare session.

On Friday it had appeared that the stock market had discounted the Tories' ballot box discomfort. And, in the event, the vast majority of British investors remained unruffled as their losses stacked up. But overseas institutions were far less sanguine.

A smattering of Continental selling set the tone for the day. With the futures market opening weakly - said to be due to US activity because of the greater likelihood of Labour in control at Westminster - and government stocks reflecting renewed uncertainty in overseas bond markets, shares were soon involved in an unequal struggle.

The Smith New Court survey showing increasing gloom among fund managers was another distress signal.

In some quarters the looming arrival of rolling settlement was seen as an inhibiting influence, with the difficulties it could cause for private investors cited as a further reason for the market's weakness.

By the close the FT-SE 100 index was down 39.6 points at 3,016.3 after touching 3,010.3. But trading was again pathetically thin with defensive marking down exaggerating many falls.

Inflationary implications were read into the producer prices figures and directed attention at US sales and prices data, due today.

In such a woeful mood of depression the market started fretting about what Kenneth Clarke, the Chancellor, might say in tomorrow's Mansion House speech, and the other economic statistics due to appear this week.

A firm New York display and last week's talk of the economic recovery were quietly ditched as the market decided to wallow in despair.

Unigate, the food and transport group, was one to suffer a rebuff, falling 10p to 362p.

Two schools of thought prevailed. One worried about today's figures being accompanied by a big takeover bid that could require a cash-raising exercise.

The other fretted about the group's door-to-door milk delivery rounds, anticipating cautious comments following last week's subdued remarks about home deliveries by Northern Foods.

The year's results are expected to show an advance from pounds 97.9m to pounds 109m.

Commercial Union also went into reverse, unsettled by the pounds 1.5bn bid for Group Victoire, the French insurer owned by the Suez group.

The shares tumbled 25p to 508p, with the British insurance industry's patchy record of overseas acquisitions causing some nervousness.

The fact that Generali, the Italian group, had looked at Victoire and then walked away was another unsettling influence.

This week's pensions White Paper also caught CU and tormented the other insurers. General Accident fell 16p to 543p and Royal Insurance 6p to 249p. BAT Industries, owner of Allied Dunbar, gave up 13p to 419p.

But TransAtlantic, in response to last week's shareholding shuffles, gained 8p to 255p. Donny Gordon, the chairman, and Union des Assurances de Paris increased their shareholdings.

Tottenham Hotspur drifted 3p lower to 80p ahead of today's Football Association ruling which some fear could lead to relegation from the Premiership.

Thorn EMI was lowered 19p to 1,085p on speculation that the long-awaited sale of its defence interests to Thomson CSF of France would soon be clinched.

Lasmo improved 5.5p to 147.5p as the market awaited the higher, all-paper Enterprise Oil bid, expected later this week. Enterprise fell 11p to 399p.

Trans World Communications, the radio group, was little changed at 177p as Emap, the publisher, moved closer to bidding. It has agreed to buy entrepreneur Owen Oyston's stake at 181p, which would lift its holding to more than 50 per cent.

Eurotunnel lost 18p to 324p as repercussions continued to rumble over its cash call, with reports that short selling ahead of the rights terms being fixed was to be investigated.

Cullens' plunge into losses lowered the shares 3.5p to 11.5p and Rhino, the video games retailer which has been under pressure recently, gave further ground, falling 3p to 26p.

Hawtal Whiting, the car designer, continued its remarkable progress, improving a further 6p to 108p.

The shares have nearly doubled since it made an encouraging trading statement and launched a pounds 5m rights issue.

Dunbar Boyle & Kingsley has received a takeover bid. Sabhi Khalil Roushdi, an Egyptian investor based in Monaco, is paying 275p a share for 90 per cent of the stockbroker specialising in 535 shares. He has limited his offer to 90 per cent to retain DBK's 535 presence. The offer, assured of success, values the firm at pounds 1.05m. Its shares were traded at 225p before the bid.

Shares of Maid, the on-line business information supplier, are now less than half their March flotation price. They fell a further 2p to 53p. Although scaled back from early thoughts of 150p, the offer was heavily criticised as being overpriced. The steady decline of the shares has occurred despite an encouraging trading statement and some director buying.

The FT-SE 100 index fell 39.6 points to 3,016.3 and the FT-SE 250 index 12.7 to 3,595.8. Turnover was 483.7 million shares with 22,939 bargains. The account ends on Friday with settlement on 27 June. Government stocks fell by up to pounds 13 4 .

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