Market Report: Pseudo-gilts dominate amid talk of lower interest rates

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The Independent Online
UTILITIES, so-called pseudo-gilts, dominated a wayward stock market. Electricities surged as the power watchdog produced a much more sympathetic report than many had expected and waters managed to draw strength from the Government's confused stance on the Scottish water industry.

With talk of lower interest rates again being heard, the dividend attractions of the power and water shares were reasserted.

Electricities were rampant, with London Electricity up 14p at 499p and Seeboard 15p better at 525p. The electricity sector rose 17.2 points. Waters made even greater headway, up 28 points with, for example, Thames gaining 13p at 490p.

But other shares were mixed. Despite the utilities contribution the FT- SE 100 index failed to hold early gains, ending 2.7 points down at 2,843.2. The FT-SE 250 index was much more emphatic, improving 10.4 to 3,236.8.

Tiphook, the container leasing group, was a main casualty, falling 40p to 288p as bear raiders mauled the shares. Seaq put turnover at 1.4 million shares. After the share weakness the company said its results, due on Wednesday, would be presented in line with US accounting requirements.

'Noting with concern' the share fall, Tiphook also 'formally requested' an investigation by the Stock Exchange into the share trading. A sharp movement in the group's shares in May, ahead of a profits warning, is thought to have attracted a Stock Exchange probe, although any findings have not been made known.

Tiphook has emerged as a target for US investors. This week US ADR holdings reached 36.17 per cent. Some transatlantic observers are forecasting a dramatic profits recovery.

Associated British Ports shaded 1p to 404p. James Capel has cut its profit forecast from pounds 58.5m to pounds 54m. But Hanson put on 3.25p to 234p as Hoare Govett drew attention to the prospects for its US operations.

Royal Insurance was another to attract analytical support. The price rose 4p to 319p as NatWest Securities suggested a 20 per cent return during the next four years.

It added: 'Royal is the composite with more to gain from the upturn in insurance rates - even after its rights issue, it writes significantly more premium income per 100p of shareholders' funds and per 100p of market capitalisation than does the average composite.'

BT was busily traded, with the shares falling 8.5p to 416p as the share sale cut-off day was confirmed as next Wednesday.

Christie International, the auctioneer, fell 4p to 187p. AB Duba, the Stockholm investment group representing the Wallenberg family, has sold its 7.5 per cent holding to Goldman Sachs in a bought deal. The US investment house will place the shares although it appears to be biding its time.

Goldman was also active in Barclays, taking the banking group off its 'priority buy' list. The shares fell 11p to 480p.

Airtours gained 6p to 340p and Owners Abroad managed to claw back a little of the ground lost following its profits slump. The shares rose 6.5p to 72.5p.

But after its trading gloom Euro Disney remained under pressure, falling to a low of 638p, down 37p.

Thorn EMI edged forward 3p to 909p. It is having talks to sell its defence division to General Electric Co. The market expects the deal to be worth about pounds 160m.

Drugs continued their erratic course. Wellcome was back in the doldrums, hit by reports of another potential rival to its Retrovir anti- Aids treatment. Zeneca remained weak, down 2p to 613p, just 13p above the rights issue price.

Micro Focus tumbled 210p to 1,835p. A downgrading for the giant MicroSoft group was one factor; another was a suggestion that US estimates for Micro Focus were about to be lowered.

Lonrho shaded 1.5p to 133p. The US investment giant Fidelity has picked up 1 million shares, taking its stake to 8.05 per cent. Last year it cut its interest, protesting at Lonrho's controversial sale of a stake in its hotel division to Libya.

Tomkins recovered after an early dip, ending unchanged at 224p. Results of the food to guns group are due on Monday. NatWest, which rates the shares a buy, is looking for pounds 170m against pounds 132.1m.

Kelt Energy held at 44p. It confirmed the takeover of Elf Acquitaine's Colombian interests. Some worry about a cash call from the revitalised group.

Coutts Consulting, once DC Gardner, held at 46p as Carr Kitcat & Aitken suggested the shares are 30 per cent undervalued.

The FT-SE 100 index, after rising 12.3 points, ended 2.7 down at 2,843.2. But the FT-SE 100 index rose 10.4 to 3,236.8. Turnover just topped 600 million shares with 27,016 bargains. The account ends on Friday with settlement on 26 July. Government stocks were firm.

Haemocell remained firm, up 10p to 172p. The ending of a share overhang and a positive presentation by the stockbroker Greig Middleton has prompted a 24p gain in two days. Greig is encouraged by prospects for Haemocell's equipment for testing for bacteriological infections in food and drink. Unilever is testing the equipment.

Sanderson Electronics firmed 3p to 308p. Many believe the shares could go higher. The group, supplying a range of computer software, has contracts worth pounds 600,000 from the Department of Social Security and Norwich Union. Panmure Gordon believes profits could climb pounds 500,000 to pounds 3.3m this year, with pounds 4.1m likely next year.