Market Report: Pre-Budget optimism boosts values

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SHARES romped to new highs again yesterday. The FT-SE 100 share index moved decisively above 2,900, closing with a 36.3- point gain to 2,918.6, adding, Datastream calculated, pounds 7.41bn to stock market values.

The market's performance caught many on the hop. New York was strong overnight but the Germans went out of their way to play down interest-rate cut speculation.

Shares were more inclined to dwell on this month's Budget. Sometimes they enjoy a splendid pre-Budget run, and with some strategists making confident noises about the suspected Norman Lamont package there was enough enthusiasm to fuel some determined buying.

One widely held view is that before Mr Lamont starts his Budget oration, the FT-SE 100 index will hit 3,000. Such bullishness is supported by the suspicion that this time round those elusive 'green shoots' have rather more strength than their predecessors and the recession at long last is coming to an end.

The share advance was not confined to blue chips. The FT- SE 250 index joined in the fun, hitting a new peak. And there was once again excited activity among the fringe shares, with many attracting heady turnover.

To a large extent the market was happy to ignore the German signals, indicating no change in interest rates after today's Bundesbank meeting. The expectation of a German cut, followed by a UK reduction, continued to captivate many observers.

Certainly the latest surge was helped by some determined Continental buying. There was talk of European institutions, mainly French and German, actively bidding for blue chips. US influences were strong.

A run of reasonable results, with the Guardian Royal Exchange insurance group producing figures ahead of expectations, also contributed to the bullish run.

Imperial Chemical Industries, reflecting further demerger thoughts, rose 43p to 1,233p. British Petroleum, spurred by US buyng, reached 289p, up 6.5p.

The Midland Bank results pushed HSBC, the controlling Hongkong & Shanghai Banking Corporation, 23p higher to 624p.

United Biscuits, following its Terry's sale to Philip Morris, fell 13p to 379p. Beaten bidder Cadbury Schweppes improved 9p to 493p.

But profit downgradings took their inevitable toll. With the big breweries struggling to hold market share and discounting heavily in the wake of the Government's controversial Beer Orders, there has been a succession of estimate revisions, reflecting squeezed beer margins.

The secretive Cazenove investment group took the axe to Allied-Lyons, the food and drink group. It apparently cut its forecast for the year just ended by pounds 15m to pounds 610m and this year's estimate from pounds 775m to pounds 700m. The shares fell 10p lower to 593p.

J Sainsbury felt the impact of a small but persistent seller and the shares slipped 1p to 524p.

Norex, the insurance group, rose 9p to 169p, anticipating a bid from the Lowndes Lambert insurance broking group, down 1p at 351p.

Suter, the mini-conglomerate run by controversial David Abell, was a strong market, up 10p at 145p. There was talk of an asset disposal to cut borrowings ahead of a bid for engineer James Wilkes, where Suter emerged this week as an 8.9 per cent shareholder.

Hartstone, the hosiery and leather group, had another difficult session, losing a further 18p to 149p. Last week the shares were 270p. MTM, the deeply troubled chemical group, rose 1p to 14.5p ahead of news that a banking standstill had been extended. 'Trading conditions continue to be difficult,' the company said.

The signalled bid for the Gabicci clothing group continued to stretch to other textile shares. SR Gent rose 5p to 65p and Campari International, rumoured to be a possible bidder, gained 10p to 279p. Gabicci eased 2p to 39p.

Union Discount had a shaky session, down 10p at 105p. The market is growing increasingly restless over the forshadowed bid. UB has indicated it could develop into a reverse takeover. The bidder is thought to be an overseas group, which explains the long delay in puting together a deal. The talks were disclosed in November.

Automated Security, the security systems group, rose 10p to 161p. There was keen interest following an overnight buyer for 2 million shares at 150p. Casket rose 2.5p to 33.5p responding to its move to expand cycle production.

Boddington Group, the Manchester pub and drink wholesaling group, continued to put on a frothy performance, gaining a further 6p to 216p. There is renewed talk the results will be accompanied by the placing of the near 20 per cent interest in JA Devenish, a legacy of the 1991 takeover struggle.

Panmure Gordon expects Boddies profits to emerge at pounds 25m compared with pounds 20.3m in the previous year. Devenish shares slipped 1p to 273p.

Shares were in fine form, with blue chips and supporters moving ahead. The FT-SE 100 index closed near its best of the day, up 36.3 points to a peak 2,918.6. The FT-SE 250 index rose 27.9 to 3,077.9. Trading was brisk with volume reaching 710.3 million shares from 35.843 bargains. Gilts were firm.

MFI Furniture Group put on 7p to 134p. It could be a significant beneficiary from any flotation by Carpetright of London, the latest creation of the retailer Sir Phil Harris. MFI owns 22 per cent of the carpet retailer and has pounds 9m of preference shares. In the year to next month MFI, which came to market at 115p in July, is expected to produce pounds 50m, down from pounds 67.1m.

Specialeyes, the loss-making high street optician, had an uneasy session. The shares fell 0.5p to 7.5p as the market became aware of a big trade, probably 5 per cent of the capital, at 4p a share. The company, the fourth-largest optician, came to market at 77p a share in September 1988. It plunged into the red last year although sales increased by 16 per cent.

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