Market Report: Securities house prompts an electricity switch-off

ELECTRICITIES blew a fuse as NatWest Securities wondered whether the distribution groups were 'overheating' and the generators were tormented by monopoly worries.

Analyst Ian Graham said the high-flying shares of the regional electricity companies were adopting a too-relaxed stance about the current review. Although he expects most of the RECs to be able to 'sustain very real dividend growth', the discussions presented risks for the sector.

In the short term the sector looked overbought and NatWest switched off two of its buy recommendations - Manweb and Seeboard. It remains a buyer of East Midlands and Norweb.

Manweb slumped 38p to 796p and Seeboard 22.5p to 386p. East Midlands, down 21p at 675p and Norweb, 37p at 735p, ignored the continuing NatWest allegiance. The sector setback encouraged Eastern Electricity to resume buying in its own shares, picking up another 850,000 between 687p and 699p. The price closed at 684p, down 20p.

The generators, National Power and PowerGen, took fright over today's scheduled announcement from Offer, the industry watchdog.

NP fell 12p to 461p and PG 17p to 525p as the stock market took the view that Offer was likely to refer the generators to the Monopolies and Mergers Commission. Offer planned to decide whether to make a reference by mid-January, but delayed any decision while it discussed proposed plant sales with NP and PG.

The rest of the stock market had another nervous session, with bonds and futures trading dominating proceedings.

Government stocks, although closing above their low points, were ruffled by talk of the Bank of England intending to announce another auction today. There was heavy US selling ahead of the dollars 11bn transatlantic treasury auction.

Goldman Sachs was the most persistent gilts seller, apparently acting for clients. The US house was also blamed for much of the weakness in equities because of alleged selling of futures contracts.

It was a torrid session for Goldman, which had to contend with rumours that it had sacked up to 10 traders because they had failed to disclose substantial losses, said to amount to pounds 100m.

But Goldman said: 'There is absolutely no truth in these rumours. Nobody has been dismissed and no losses have been hidden.'

The FT-SE 100 index swung from a 17-point gain to a 22.1 fall at 3,407. The supporting FT-SE 250 index fell 32.2 to 4,068.9. Turnover nudged 1 billion shares.

The interest rate debate, following Tuesday's modest cut, is also signalling unease with fears the US increase last Friday is more significant, heralding upward moves in British rates.

Yorkshire TV continued to reflect takeover speculation. The shares rose 20p to 330p and the warrants 19p to 148p. Reuters gained 31p to 2,049p but Pearson slipped 10p to 702p.

Vodafone, the mobile telephone group, attracted determined US buying, gaining 15p to 630.5p. It is thought a New York investment presentation will be made later this month. The BT results left the shares 1.5p down at 455p and the partly-paid 1.5p lower at 197p.

Lloyds Bank, due to kick off the banking profit season today, edged forward 2p to 615p. Yamaichi, the Japanese securities house, regards the shares as a buy, forecasting profits of pounds 1bn with pounds 1.2bn this year.

Lonrho, said to be making a pounds 100m convertible bond issue, fell 3.5p to 162.5p. Redland ran into selling on German talk that this year's trading will be particularly difficult. The shares dropped 21p to 598p. Starmin, the aggregates group, jumped 1.75p to 5p on its proposed acquisition.

Dawson International, the clothing group, dipped 7p to 134p following big US provisions. Motor dealer Jessups reversed 20p to 96p following warnings of a loss and the departure of Ron Joseph, managing director.

St. James Place, the financial group, shaded to 183p as directors and family trusts sold 16.75 million shares at 178p.

Savoy Hotel continued to attract attention on hopes Forte will reverse its upmarket hotels into the group. The shares rose 23p to 1,075p.

Energy Capital, a newcomer providing finance for oil and gas developments in the southern US, achieved a 13p premium. The partly-paid 50p closed at 58p and the free warrants at 28p.

Tomkins, the conglomerate spreading from cakes to firearms, rose 3p to 258p. It is part of a warrant basket launched by Salomon Brothers with a pounds 290 striking price. By coincidence Greig Middleton issued a buy circular on Tomkins, suggesting profits will reach pounds 260m this year and nudge pounds 300m next. Others in the Salomon basket include Grand Metropolitan, down 11p at 450p, and Hanson, up 1.5p to 299.5p.

The FT-SE 100 index fell 22.1 points to 3,407 and the FT-SE 250 index 32.2 to 4,068.9. Turnover was 995 million shares from 40,195 deals. The account ends today with settlement on 21 February. Government stocks were lower.

Alpha Airports, the catering and duty-free management buyout from the Forte hotel group, made its expected strong debut despite the sluggish market. The shares, placed at 140p, closed at 172p. Trading was heavy with Seaq putting volume at 36 million shares. The group is expected to produce profits of pounds 19.1m for the year just ended. Forte has retained 25 per cent.

Ladbroke's new management is rumoured to be on the verge of beginning the restructuring of its controversial property portfolio. Rumours buzzed yesterday that a pounds 100m property disposal was about to be announced. It was enough to lift the shares 2p to 204p after 207p. The betting and hotel group's creator, Cyril Stein, departed last month. He was replaced by John Jackson.