Market Report: Pilkington shines as the market shatters around it

PILKINGTON was one of the few stocks left standing in a shattered market as speculation of a bid floated around the glass group.

Buyers were a rare commodity yesterday, but most of them seemed to turn up at Pilkington's door, leaving the stock 4p better at 104.5p, within a whisker of its yearly peak.

Given that the overall market plunged by 2.4 per cent, Pilkington's rise was no mean feat and lent credibility to talk of a management buyout or a strike from a venture capitalist. The name of its French rival Saint Gobain was also mentioned, although the competition hurdles to a takeover could be insurmountable.

Poor old Pilks has been a bid target almost since glass was invented, and supporters of the story had a tough time convincing the market that this time is for real.

The level of interest seen in the stock - over 11 million shares changed hands - was a major bull point for the rumour. Well-connected brokers said that a mixture of hot money and institutional cash chased the stock higher, with one buyer prepared to deal 1.35 million shares at 107.25p - well above the market price.

A Goldman Sachs note on the building materials sector recommending Pilkington as a "trading buy" helped sentiment, but dealers were convinced that the analytical support was a mere sideshow to the takeover story.

The Goldman paper also downgraded Tarmac and slapped on a 520p price target, and the stock promptly lost 16.5p to 510p.

The main bear story of the day came from Airtours. The holiday group nosedived 21.5p to 419.5p amid talk that poor sales of its holidays would force it into a round of late summer price cuts. Some bloody-minded dealers said that the discounts could even trigger a profits warning.

The rest of the market could have done with an early eclipse to hide its abysmal performance. The FTSE 100 plunged 148 points to 5,978.4 - its lowest level in six months.

The tumble was blamed on a cocktail of bearish factors. The market sages said that fears of US and UK interest-rate hikes, jitters over equity overvaluation, an unsettled Wall Street and volatile bonds combined to push equities lower.

The general feeling is that this market will probably head south until the US Federal Reserve meeting on 24 August. The mysterious charts seem to confirm brokers' gut feelings. After breaching the key 6,000 support level, the next barrier is around 5,968, and after that the index could fall to 5,875.

The undercard could do little to escape the sell-off and the midcap ended 42.9 points down at 5,926.2, while the Small Cap shed 17.1 to 2,713.1.

Most of the big hitters turned into red chips as the sell-off left only eight stocks higher on the day.

ICI was nudged 9.5p upwards to 763.5p amid whispers of heavy buying from CSFB. The broker was said to be attracted to ICI's cyclical qualities and recent good figures. Rumours of a sale of its Acrylics division, maybe to US rival Huntsman, and good figures from sector peer BOC, up 11p to 1,292p, also helped.

BP Amoco survived the market carnage by pleasing analysts with good interims and rose 2p to 1,225p

BP's modest rise was a good performance when compared to other blue chips. Highly-rated telecoms, cables and Internet stocks were destroyed by profit- takers amid rumours of a couple of large sellers desperately trying to offload the sector.

Energis plunged 179p to 1,381p and Telewest Communications fell 20.75p to 216.5p, while Dixons, the retailer with a dash of Internet, gave up 95p to 1,041p. Its spin-off Freeserve fell 17p to 178p. Online financial broker eXchange lost 11.5p to 189p, below the 200p price of its recent float.

FTSE 100 heavyweight Glaxo touched a 12-month low of 1,507p after profit takers lopped 22p off its price. Any lower and a deal with SmithKline Beecham, down 28p to 724p, will be back on the cards.

Lloyd's insurer CLM jumped 6.5p to 137p on reports of the market's demutualisation and talk of a bid from Australian rival QBE, or even Warren Buffet's General Re. Rival Wren perked 6p higher to 119.5p on revived talk of a bid from Britannic, unchanged at 980p.

Iceland, up 6.5p to 270p, warmed up the undercard on rumours of buoyant trading and vague takeover talk. Oil driller Lasmo flared 6p higher to 164p after Deutsche Bank said buy and targeted 190p .However, a bearish survey on childrenswear sent Storehouse, the owner of Mothercare, 4p lower to 114p.

Perennial bid target Safeway was flat at 235p. Cash-and-carry group Booker cashed in a 1.5p rise to 108.5p as broker Kyte Securities said that it could go as high as 150p after a meeting with the company.

Old people homes minnow Trinity Care nursed a 20.25p rise to 153p on vague bid talk, while cosmetics tiddler Victory Corporation put on 0.75p to 8.75p on talk that Richard Branson might take it private.

SEAQ VOLUME: 1.1bn

SEAQ TRADES: 77,256

GILTS INDEX: 105.29 -0.62

ALPHAMERIC yesterday bucked the computer sector's bloodbath and firmed 0.5p to 84p on sustained speculative buying. The provider of satellite communications software is believed to be close to a number of deals to supply bookmakers such as Ladbrokes and William Hill, banks and retailers. More far-fetched whispers suggest that Alphameric's recent successes might have attracted a huge player, with some dealers muttering the name of France Telecom.

IS SCAPA nearing a major disposal? The maker of industrial products was unchanged at 171p yesterday but some cunning dealers are buying the stock amid rumours of a big announcement. Insiders believe that Scapa is lining up the disposal of its specialty materials division for around pounds 30m. The group recently sold off its paper unit for pounds 329m and a sale of the specialty subsidiary will fulfill Scapa's aim of focusing on technical tapes.