Market Report: Schroders leads merchant banks to steal the show

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A WEEK dominated by the financial implications of a complex Budget ended, perhaps fittingly, with merchant banks stealing the stock market show.

Schroders prompted the excitement. The shares romped to a new peak, reflecting the group's surprisingly strong profits performance.

The market had assumed that the reduction in corporate activity had hit the merchant banker's profits. But Schroders increased its after-tax profits by 23 per cent to pounds 64m and could reach pounds 120m this year when it will have to disclose its figures in full.

Schroders' main shares climbed 63p to 1,953p, a two-day gain of 178p. The non-voting shares improved 25p to 1,613p.

Among others pulled higher were Kleinwort Benson and SG Warburg, two groups that should also be reaping rewards from the upsurge in share trading. Kleinwort rose 12p to 387p and Warburg 21p to 638p. Hambros, in the process of floating its insurance operations, improved 11p to 345p.

The rest of the market showed signs of shaking off its Budget depression, which has hit blue chips although many second-line and fringe shares have continued to make headway.

The FT-SE 100 index achieved its first post-Budget gain, up 20.4 points at 2,900.1. Second-line shares, as measured by the FT-SE 250 index, continued to make determined progress. The index stretched to its third consecutive peak with a 21.4 advance to 3,154.7.

Once again most of the action, in terms of shares traded, was in second-string shares and tiddlers. Blue- chip trading is still retarded by the cautious approach the pension funds and other institutional investors have been forced to take following the dramatic investment tax changes in the Budget.

Sterling's strength and the slightly higher inflation count encouraged the feeling that the Government will not indulge in another interest-rate cut, at least in the near future.

Imperial Chemical Industries made a significant contribution to the FT-SE 100 index strength. The shares rose 25p to 1,240p on solid US buying. Paine Webber, the US securities house, was said to be supporting the shares.

P&O, the property and shipping group, gained 10p to 595p. There were suggestions next week's figures would be accompanied by a rights issue. Profits are expected to emerge at about pounds 220m compared with pounds 200.1m. Bunzl, the packaging group, was another to attract cash- call rumours. The shares rose 1p to 130p.

Cable and Wireless managed to shrug off its links with the volatile Hong Kong market, gaining 20p to 725p. A Barclays de Zoete Wedd profit upgrading provided the support. The securities house has lifted by pounds 15m to pounds 810m and by pounds 20m to pounds 890m.

Ladbroke, the betting and hotel group, drew support from NatWest Securities. The shares rose 8p to 205p with NatWest drawing attention to the benefits Ladbroke should get from the ACT changes.

NatWest also likes Storehouse. It has lifted this year's forecast by pounds 5m to pounds 45m, excluding exceptionals, but remains on pounds 65m for the following year. The shares, ruffled on Thursday by a Hoare Govett downgrading, firmed to 200p.

Boots improved 15p to 527p, a two-day gain of 33p. Buyers have latched on to the benefits its chemist division could enjoy if the Government's suggested changes to the system for paying pharmacists go ahead.

Tiphook, the container group, held at 377p following an analysts' meeting. British Aerospace was another unchanged - at 280p - after meeting analysts to discuss its Rover car offshoot.

Spring Ram, after Thursday's turmoil, edged ahead 9.5p to 73p. Trading was again heavy with volume put at 15 million shares.

Unitech, at one time down to 203p, recovered to 224p. The fall stemmed from an earnings downturn at Nemic-Lambda, its 50.6 per cent Japanese subsidiary.

Property shares continued to gather support. Takeover favourite Hammerson, although above its low, closed 13p down at 403p. The 'A' restricted voting shares slipped 7p to 369p. Talk is that the bid, said to be from British Land, will materialise next week.

Slough Estates, figures next week, rose 11p to 206p. A dividend cut is expected. Profits should be pounds 60m but the year's payout is being cut 30 per cent to 8.1p a share. Speyhawk continued to respond to its St Pancras link, up 1.5p to 16p.

The recent strength of property shares had a beneficial influence on Barclays with its much-criticised and costly exposure to the property market. Its shares rose 13p to 425p.

The engineer James Wilkes held at 65p. After the market closed Suter, reporting on Monday, increased its shareholding from 8.6 per cent to 10.07 per cent. Suter rose 3p to 154p.

David Lloyd Leisure was, as expected, a hit. The shares of the tennis group opened at 153p and closed at 180p with many expecting DDL to attract the attentions of a predator. Offer price was 150p.

Ticketing Group, the ticket sales operation, held at 2.25p. Schroder Investment Management has picked up a 4.5 per cent interest.

THE FT-SE 100 index closed near its best of the day, up 20.4 points at 2,900.1. The FT-SE 250 index gained 21.4 to 3,154.7. Trading volume was 824.1 million shares with 37.798 bargains. Account ends on 26 March with settlement on 5 April.

EXPECT UBS Phillips & Drew to make bearish noises about Airtours which this week failed to take over rival Owners Abroad. UBS, Owners' stockbroker, is likely to suggest that Airtours' days of heady growth are over. It is looking for profits of pounds 38m in the year to September against pounds 36.5m. UBS will point out that the failed bid cost Airtours pounds 8m. Airtours fell 1p to 322p; Owners held at 124p.

HONG KONG investors are coming to the aid of struggling Raglan Property Trust. As part of a reconstruction, announced yesterday, they are paying more than pounds 4m for new shares. A pounds 3m debt for equity exchange by the group's bankers and an offer to existing shareholders to pump in pounds 2.3m also form part of the reshaping which will leave the group with cash. The shares fell 2p to 1.25p.

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