Market Report: Shares slump to 18-month low as rates fears grow

SHARES plunged to their lowest for more than 18 months yesterday as fears grew that the French will say 'no' to Maastricht and thereby increase the burdens on sterling.

Throughout the day the pound remained nervous, increasing pressure for an interest rate increase. The US dollar put on a steadier display.

Equities continued to perform as if higher interest rates were inevitable. Many in the stock market are convinced a 1 per cent advance will be announced soon. The FT-SE share index ended 30.1 points lower at 2,281, its lowest close this year. At one time it was down 50.5.

Significantly, turnover improved. Two programme trades, from County NatWest and Barclays de Zoete Wedd, increased activity and it was suggested the market was still attempting to accommodate the residue of Monday's Smith New Court programme trade.

The trades clearly contained a sell bias and, with the futures market taking a negative stance, ensured that any equity rally could not have any telling impact.

But without the trades share volume would again have plumbed new lows, indicating most investors remain on the sidelines.

Once again internationals and interest-sensitive stocks were under pressure. Meyer International, the timber group, had the added disadvantage of having to contend with persistent rumours of a profit downgrading. The shares tumbled 13p to 243p.

Grand Metropolitan was the blue chip determined to unsettle the market. It attempted to destroy the recession-proof image of the drink groups by warning profits would be little changed, although a dividend increase could be expected.

Its shares slumped 33p to 379p, dragging down related issues. Allied-Lyons, as the Japanese securities house Nikko suggested profits should be taken, retreated 12p to 560p. Hotels were also hit with brewer and hotelier Vaux Group falling 7p to 153p.

British Petroleum shaded 1p to 184p. Some still believe it could sink to 160p. But the Americans continue to buy. Guaranty Nominees, representing most of the US interest, declared a near-18 per cent interest. But included in the US involvement is a 3.3 per cent stake held by the Kuwait Investment Office.

Even so, the latest Guaranty announcement shows the Americans have remained buyers, despite the dividend cut. But for transatlantic interest BP could be 160p. A late deal, thought to be part of a programme trade, went through at 178p.

British Gas failed to live up to the highest result hopes, ending 5.5p down at 237.5p.

Burton Group had a difficult session with a line of 4 million shares seeking a home. It seemed much of the stock remained unaccommodated. The shares fell 1.5p to 30.5p.

Supermarket group Tesco fell 3p to 221p. There is a nagging suspicion that a large rump of last week's attempted placing continues to hover. Switching to J Sainsbury was evident with the shares up 1p to 448p.

William Low, the Scottish supermarket chain, rose 3p to 177p. Stockbroker Bell Lawrie White has trimmed this year's profit forecast to pounds 19.5m. 'Despite being capital hungry the group is cheaply rated relative to its competitors,' it says.

Utilities turned in another determined performance, although best levels were not always held. Thames Water gained 6p to 439p. Electricals also made headway.

Wellcome slipped 12p to 792p and Glaxo Holdings weakened 12p to 689p. Medeva, where stories of a big US buy continued to hover, fell 4p to 161p.

Next, the favourite retailer of US securities houses, lost 2p to 87.5p. It was unsettled by a big trade on the overnight ticker, suggesting a price of 86p.

British Steel lost 2.5p to 49p as European steel prices softened again. County is bearish. 'A dollar crisis is the last thing BS needs in the current depressed environment', it observes.

HSBC (the Hong Kong & Shanghai Banking Corporation) managed modest headway on slightly better-than-expected figures, but National Westminster retreated 13p to 302p as SG Warburg changed its stance from buy to hold. The bank's mortgage exposure prompted the change.

Among the second-liners, Gibbs Mew, the family controlled Salisbury brewer, starred with a 15p gain to 198p as Brierley Investments rolled out its signalled bid.

CMW Group continued to reflect directors' buying, gaining 2p to 15.5p. Acorn Computer remained firm ahead of a presentation tomorrow.

Another grim day for shares left the FT-SE share index nursing a 30.1-point fall to 2,281. At one time it was down 50.5. The FT 30-share index lost 32.7, dipping below 1,700 to 1,681. Trading volume perked up to 537.7 million shares with 19,218 bargains. Government stocks fell by up to three quarters of a point

Battle for control of Simpsons of Cornhill took an intriguing twist when Spread Trustee Co said it had sold half its 20 per cent interest to a company related to Robert Klapp, leading the rebel shareholders. The rest would appear to be with David Rowland, the financier. Roy Ackerman, Simpsons chief, believes he has the support to beat off the challenge. The shares held at 39p.

A two-way tug at Iceland Frozen Foods. County NatWest is keen on the shares, but rivals Carr Kitcat & Aitken suggest they should be sold if they display any strength. Carr analyst Tony Cooper is anxious about his profit forecast of pounds 54m for the year, which he feels is 'vulnerable'. For 1993 he is looking for pounds 62m. Iceland shares fell 3p to 500p yesterday.