Market Report: Shares recover some ground amid gloom

SHARE prices recovered some of the ground lost on Monday, enabling the FT-SE index of the leading 100 stocks to reclaim the 3,000 mark with a 18.3 point gain to 3,001.8.

The recent fallout in share prices, however, has prompted leading broking houses to lower their expectations of where the index will be at the end of the year.

With no signs of an upturn in equity trading, Kleinwort Benson has sliced its FT-SE 100 forecast from 3,400 to 3,300. UBS has settled for 3,000, and believes the London market would be worth buying if the index slipped to 2,900. Lehman Brothers thinks the current level is fair.

Following the warning from SG Warburg about the effects on profits of low equity trading, Hambros yesterday highlighted the problems in the bond market. Hambros dropped 26p to 225p after disclosing that first-half profits were set to plunge from pounds 41m to between pounds 18m and pounds 23m.

Smith New Court, which took the axe to its profit predicitions for Warburg, lowered its full-year forecast for Hambros from pounds 89m to pounds 53m before tax. The knock-on effect clipped 7p off Kleinwort Benson to 433p, and took Schroders' price down by 40p to pounds 12.85p. Warburg, however, reclaimed 11p of the 101p lost the previous day and closed at 580p.

Meanwhile, volume equity trading remained subdued yesterday at 530.9 million shares, and was particularly low given that nearly 9 per cent of the day's business could be attributed to Midlands Electricity buying back 10 per cent of its shares. Cazenove, the blue-blooded broker, handled the buy-back at 725p a share. Midlands rose 13p to 714p.

Electricity companies generally had a better session after being hit on Monday by concern about a possible pounds 1bn tax bill for the flotation of the National Grid, and Labour's plans for excess profits.

A recommendation note on the regional electricity companies by Strauss Turnbull also helped. Double-figure gains were common, taking in East Midland, up 25p to 713p, Yorkshire, ahead 19.5p to 710p, and South Wales, up 17p to 770p.

The picture was not so rosy in the motor components sector, however. Share prices were marked lower as Ford announced plans for a three-day week at its Halewood and Dagenham plants.

Biggest fallers were Lucas Industries, off 11p to 181p, Laird Group, down 7p to 356p, Turner & Newall, which fell 14p to 208p, Avon Rubber, 11p lower at 570p, and GKN, 12p off at 601p.

Ford's move also shunted some of the car dealers. Henlys lost 3p to 281p, Lex Service retreated 12p to 348p, and Cowie Group fell 8p to 211p. Frank Gates slipped 4p to 64p after disappointing interim profits of pounds 1.06m, down from pounds 1.15m.

Elsewhere, Cannon Street Investments was the day's worst performer. The shares crashed from 26.5p to 14p at one stage, before closing at 15.5p. A lack of fresh news on disposals and a drop in half-year profits did the damage.

Shares in Blenheim, the exhibitions group, were lively. The price rose by 7p to 275p in early dealings on rumours of a takeover bid from Reed International.

There was also talk that Generale des Eaux of France was looking to add to its 14.7 per cent stake in the company, which has lost favour with investors because of a succession of profit warnings. Bleinheim's shares, which traded as high as 402p earlier this year, closed at 265p. Reed, off 7p at one stage, finished 5p lower at 755p.

British Aerospace eased 3p to 439p after finally confirming it was the mystery suitor for VSEL, up 17p to pounds 11.95p. Speculation is for a bid of between pounds 12.50 and pounds 13 a share.

Leisure analysts were heartened by a positive trading statement from Compass, the contract catering group. There was talk that full-year forecasts of around pounds 58m pre-tax for Compass, ahead 8p to 327p, might be upgraded slightly. Analysts said they were surprised with the swiftness of the integration of the purchase of the Canteen Corporation business, and a lower-than- expected hit from the rail strike on the company's Traveller's Fare operation.

David Lloyd Leisure firmed 2p to 245p after securing planning permission for a tennis and fitness club in Sidcup, Kent.

In drinks, Guinness gained 4.5p to 457.5p on reports that its Bell's whisky, relaunched as an eight-year old, was gaining market share at the expense of Famous Grouse, produced by Highland Distillers, down 9p to 436p.

Fresh rumours surfaced about Forte possibly looking to sell its Harvester chain of pub restaurants. Harvester was taken off Forte's sell list last year after buyers were put off by the asking price, said to be in the region of pounds 120m. Shares in Forte, which is due soon to shell out at least pounds 230m to buy the Meridien hotel chain from Air France and other minority holders, rose 2p to 226p.

Keep an eye on EFG, formerly known as the Economic Forestry Group. Rumour has it that it is close to selling a garden centre occupying eight acres in West Sussex. Confirmation may come with interim figures at the end of the month. The deal could be worth between pounds 2m and pounds 2.5m, which would push EFG's asset backing to 20p a share against a market price of 13.5p.

The FT-SE 100 share index crept back through 3,000, rising 18.3 points to 3,001.8. A 5.7-point gain to 3,455.3 was recorded by the FT-SE 250. Volume trading was low at 530 million shares, spread across fewer than 23,000 bargains. Gilts rose by around pounds 3 16 .

(Graph omitted)

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