Market Report: Rights spectre ensures insurers miss the feast

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THE composite insurance sector stood out like a sore thumb yesterday as the market went into overdrive, discarding recent fears about a rise in interest rates.

Speculation about a big rights issue next week from Commercial Union did the damage.

CU shares fell 9p to 539p, and were overlooked by the army of investors who ventured out on a buying spree across the length and breadth of the market.

The company is committed to spending about pounds 1.5bn on buying the Cie de Sue insurance operations from Groupe Victoire of France. Consensus of opinion in dealing rooms is that CU will have to tap shareholders for funds.

Concern about the cash call dismantled the previous day's favourable sentiment arising from CU's ambitious joint venture with Abbey National. The venture will be the sole supplier to Abbey of house and contents insurance.

General Accident lost 5p to 604p; composites that did rise were restricted to advances of a couple of pence.

CU and GA were two of only six of the top 100 shares to record losses as the market notched up its biggest one-day gain since the buying spree in the wake of last November's Budget.

A firm platform for early dealings was established by strong overnight performances on Wall Street, where the Dow Jones advanced 34 points, and in Tokyo, where the Nikkei-225 soared nearly 390 points to 20,660.

And in contrast to last week's desertion, market-makers stayed at their posts and pushed shares higher as a queue of buyers grew longer as the day wore on. Prices rises, though, were exaggerated by stock shortages and orders were left unfulfilled in a session during which more than 810 million shares were traded.

The FT-SE 100 share index opened 20 points higher. That gain was doubled by noon, and was trebled to 60.1 points to 3,157.5 by the close. The index rose 66.3 points the day after the last Budget.

Nearly all sectors registered advances on the day, particularly builders, stores and properties.

Investors seemed almost blind to some of the bad corporate news filtering into the market.

Burton, for instance, firmed 3.5p to 59.5p despite announcing a pounds 20m provision to close its IS discount clothing chain. The provision will lop 44 per cent off expected annual group profits of pounds 45m.

The Cassandras among City economists could only look on with disbelief. Their recent cries that interest rates must go up this week fell on deaf ears as dealers processed more than 31,000 share transactions.

Gilt-edged stocks, aided by a firm German bund market, advanced by a full point despite caution ahead of Bank of England's quarterly bulletin.

The Bank's short-term inflation projection has fallen since its May quarterly report, although its two-year outlook remains virtually unchanged. It said that RPIX, the Government- preferred target of inflation, was expected to peak above 3 per cent in the first quarter of 1996 before falling back again.

Solid, top-of-the-range interim figures from National Westminster neutralised last Friday's disappointing results season curtain-raiser from Lloyds.

NatWest climbed 17p to 470p. A heavy 16 million shares were traded. That lit the fuse under the sector, taking Abbey National up 5.5p to 390.5p, Barclays 11p to 568p, and Lloyds 6p to 544p.

Merchant banks were lively. Kleinwort Benson continued to advance ahead of tomorrow's release of inteim results, closing 20p higher at 501p. Hambros added 10p to 310p, and SG Warburg gained 25p to 769p. This was all good news for Smith New Court, one of the City's biggest securities houses, up 7p to 389p.

Away from the financials, equities received another boost when British Petroleum waded in with half-year profits far ahead of analysts' expectations.

Despite concen about sustained pressure on profit margins in oil refining, the shares increased 7p to 418.5p - a high for this year and more than double the 185p the price slumped to in the summer of 1992.

The buoyant mood was not dampened by the failure of crude oil prices to hold ground above dollars 19 a barrel. Price for Brent crude fell 55 cents to dollars 18.68.

Shell, due to report interims next week, closed in on its high of 755p with a 9p advance to 746p. There are hopes that the a solution to the strike chaos in Nigeria may be in sight.

Share prices recorded their biggest one-day advance since the Budget last year. Amid heavy trading of 810 million shares, the FT-SE 100 index soared 60.1 points to 3,157.5. The FT-SE Mid climbed to 3,673.4, up 32 on the day. Gilts rose by a full point.

The numbers came up yesterday for Havelock Europa, the shopfitter. Camelot, operator of the National Lottery, has signed up Havelock to build a large number of its play stations and terminal counters. About 10,000 outlets are due to be in operation when the lottery starts in November, rising to 35,000 in 1996. Shares in Havelock climbed 8p to 177p, just 2p shy of this year's high.

The runaway price of Bluebird Toys, maker of the best-selling Mighty Max and Polly Pocket miniature toys, has led to a mass conversion of the 12 per cent loan stock which has a maturity date of 2005. Some pounds 4.4m of stock, 74 per cent of the total in issue, has been converted into 11.7 million ordinary. The shares rose 8p to 213p, against the lowly 7.5p at which they traded in 1991.

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