Market Report: Rumours of AT&T link-up lift Cable and Wireless

HOPES that American Telephone and Telegraph will respond to the latest BT excursion into the US by dialling into a UK telephone operation lifted the shares of Cable and Wireless and Vodafone Group yesterday.

The stock market believes AT&T could be feeling squeezed by BT's move to pay pounds 2.8bn for a 20 per cent interest in MCI, one of America's largest long-distance telephone groups.

It could, therefore, be tempted into forging an alliance with C&W, up 9p to 753p. Another possibility could be a bid for Vodafone, the cellular telephone group, up 13p at 456p.

AT&T has already shown its annoyance at BT's international aggression. It is lobbying the US authorities to reject the UK group's application to offer services in America if it is not given permission to develop its operations in this country.

The Americans regard the UK and Europe as important expansion areas but feel their ambitions are restrained by entrenched telephone networks and government restrictions on overseas operations.

A link with C&W could already have eluded the US group. C&W, which is thought to have a series of international deals under discussion, has sold a 20 per cent interest in its Mercury network to Bell Canada. Among the rumoured C&W links are a 25 per cent interest in Eire's state-owned network and a 35 per cent stake in the Greek network, OTE.

BT shares missed the telephone buzz, falling 3.5p to 418p.

The rest of the stock market had a downbeat session with the FT-SE 100 index falling 10.2 points to 2,852.8 in often sluggish trading.

Properties, after Wednesday's George Soros-inspired excitement, had to contend with the inevitable profit-taking.

British Land fell 26p to 318p with the nil-paid rights opening at 74p and closing at 68p. Uninspiring results from MEPC also undermined sentiment. However, some of the smaller groups made headway, with London & Associated Investment Trust up 3p at 32p and Regalian Properties 1.5p firmer at 24.5p.

With drug shares dull Zeneca again gave ground. The shares fell 8p to 626p and the nil-paid rights 7p to 30p. But Imperial Chemical Industries continued to 'celebrate' its new slimline look, improving 13.5p to 687p.

British Airways fell 6.5p to 297.5p, ruffled by the continuing industrial unrest and disappointing May traffic figures.

Sun Alliance, the biggest general insurer, edged ahead 2p to 335p as TransAtlantic Holdings said it picked up 400,000 shares, taking its interest to just above 3 per cent.

TransAtlantic, with the French Union des Assurances de Paris, took control of the Sun Life Assurance group in 1991. South African-controlled TransAtlantic held at 274p.

Earlier this year Donald Gordon, TransAtlantic's chairman, said he hoped to expand the group's UK insurance operations. Sun Alliance has a market valuation of pounds 2.7bn.

Forte, the hotel group, edged ahead 2p to 200p as Kleinwort Benson, for the first time for two years, made positive noises. It expects profits to reach pounds 105m this year and pounds 142m next year.

'The shares have underperformed by 54 per cent over the past four years and the prospect now is for outperformance', said Kleinwort Benson.

Laura Ashley, the fabrics and frocks retailer, gained 3p to 114p as the Ashley family sold another five million shares, cutting its stake to 34.1 per cent. The shares were sold at 108p.

British Steel advanced 3p to 102.5p on the new round of price increases - the third this year. US investors, through ADRs, now have 17.88 per cent of the capital. ASW Holdings, the steel stockholder, rose 5p to 220p on the back of BS.

T&N, the motor components group, improved 7p to 184p. It announced a pounds 39.9m share placing at 170p. The cash is needed for the acquisition of Goetze, a German business. Results pushed VSEL 26p higher to 795p.

Scholes, the electrical group, fell 10p before rallying to close 3p down at 135p. Talks that could lead to a bid have been held but 'have now been terminated'.

Phoenix Timber dropped 7p to 23p following a warning of a pounds 2m loss, and Caird Group, the waste disposal operation, lost 7.5p to 17.5p in response to a depressing trading statement.

Doeflex, a maker of plastic products, rose 12p to 147p, following meetings with stockbrokers.

Ex-Lands, developing golf centres, gained 3p to 28p. London Finance & Investment Group has paid pounds 1m for a 7.2 per cent stake. It acquired the shares from Creston, a contracting group planning a property takeover. Creston shares were suspended at 18.5p.

Countryside Properties, in the throes of a pounds 16.8m rights issue, shaded 1p to 128p with the nil-paid down 2p at 19p.

Carr Kitcat & Aitken rates the shares a buy. It has lifted this year's profit forecast by pounds 2m to pounds 7m and next year's by pounds 1.8m to pounds 9m. Countryside, aiming to become the biggest housebuilder in the South-east, lost pounds 11.7m last year.

The FT-SE 100 index fell 10.2 points to 2,852.8 and the FT-SE 250 index 7.8 to 3,183.6. Trading was again slack with turnover reaching 568.2 million shares with 29,264 bargains. The accounts ends today with settlement on 14 June. Government stocks were little changed.

Westralian Resources is attracting attention. But with more than 90 per cent of its capital in institutional hands, the shares are a difficult market. The company has some intriguing mineral investments, including 43 per cent of Montagu Gold. Assets are thought comfortably to top 25p a share. Although Australian listed, it is run from Scotland with Waverley Mining owning 9 per cent.

Sidlaw Group jumped 20p to 350p as it achieved another lucrative oil services contract. It already runs support services for the North Sea operations of a number of oil giants, including British Petroleum. The latest deal, with Amoco, could be worth up to pounds 500,000 a year. Profits this year are forecast at pounds 8.2m. The group's oil side has served it well as its packaging and textile operations have suffered.