Market Report: Shell and Compass lead the retreat

AN UNLIKELY food and oil combination destroyed any faint hopes of Footsie pulling out of this week's dismal spin. The index ended 38.4 points lower at 5,594.1; it is the first time it has closed below 5,600 since early February. At one time it was down 85.6.

Shell, off 26.5p to 356p, and Compass, down 62p to 538p, led what was another ragged retreat.

Weak second-quarter figures hit the Shell oil giant, and the contract caterer Compass was, it appeared, roasted by Dresdner Kleinwort Benson, which put a sell sign over the shares. The investment house took the view that the price had run ahead of the game.

Compass has had a good spell as encouraging results mingled with takeover speculation (Rentokil Initial is the favoured predator). Turnover was a heady 6.3 million shares.

Shell's discomfort was reflected in other oil shares. British Petroleum fell 10p to 771p with the ripples spreading to Enterprise Oil, off 20p at 464p, and Lasmo, 4p at 209p.

At one time the Monetary Policy Committee seemed to be about to assume a rescue role. However, its unsurprising decision to leave interest rates unchanged failed to create much confidence, with the market deciding to dwell on its other pet worries, such as Asia, the problems facing currency- sensitive shares with the consequent pressure on earnings and, of course, the Clinton saga. Still, the pegged rates probably helped lift shares from their early afternoon lows.

British Airways, on the verge of committing pounds 1.5bn to replacing its ageing fleet and still awaiting clearance on its proposed American Airlines deal, fell 25.5p to 569.5p.

Stagecoach, on hopes of another acquisition, featured on the blue-chip leader board, running ahead 76p to 1,289p. Rolls-Royce, on expectations of more aero-engineer orders, rose 10.5p to 233.5p and Kingfisher improved 15p to 463p following Henderson Crosthwaite support.

General Electric Co put on 9.5p to 472p as Salomon Smith Barney said the shares could outperform.

Footsie has had a torrid time since reaching a 6,179 peak last month. It has been hit by almost continuous selling as some investors have taken the view that the long bull run has at last hit the buffers.

Supporting indices were also off-colour yesterday, although falls were more restrained than among the blue-chip brigade.

Shire Pharmaceuticals was the day's major casualty. The company admitted the fire at a US plant could cut sales by at least $21m, the equivalent of two months' trading. The shares, off 86p on Wednesday, collapsed a further 100p to 293.5p.

Superstores were left on the shelf after Taylor Nelson AGB's influential monthly research indicated J Sainsbury, on a month-to-month trend, was taking customers from Tesco, down 5p at 175p. Sainsbury, although suffering a year-on-year decline, firmed 2.5p to 505.5p.

Next, the fashion chain, was again under pressure. A steady stream of sellers, worried about July's sales, left the shares nursing a 28p fall to a 448p year's low.

Racal Electronics rose 11p to 393.5p. Its delayed year's figures are due to appear today. The company held back its results until it had completed the sale of the remainder of its data communications business. It is likely, because of write-downs, that Racal will report a loss, although there should be an underlying profit of around pounds 70m.

Partco, the car parts firm, retreated 13.5p to 222.5p after rebuffing bidder Finelist, unchanged at 282.5p. ILP, the paper and packaging group, fell 5p to 30.5p after bid talks ended. Concentric, an engineer, strengthened 14p to 157.5p following a management buyout. Clan Homes improved 10p to 110p on bid talks.

Bid rumours swirled. Hepworth, the building materials group, was given another whirl, jumping 15.5p to 190p from its year's low. The German group Vaillant was again said to be interested. Vaux, the brewer, and Booker, the cash and carry chain, were others remaining in the bid spotlight.

The dancing stopped for Northern Leisure, the disco chain. Panmure Gordon cut its profits estimate from pounds 16.2m to pounds 14.3m and the shares relapsed 10.5p to 140p, lowest this year. And London International fell 16.5p to 209p after warning of lower profits.

Tepnel Life Sciences, said to be in the dumps through persistent selling by one fund manager, managed a 4p recovery to 23p. .

Hidden Hearing International, a hearing aid retailer, arrived at 149p from a 140p launch; Premier Direct, selling books and toys in offices and factories, held at 182.5p. The shares were sold at 180p.

Jarvis, the construction and rail maintenance group, hardened 4.5p to 630p. It is due to make an investment presentation next week.

The former Falklands flyers fell back as Shell, drilling in the South Atlantic, played hopes of a strike. Desire Petroleum fell 15p to 170p and its two satellites, Greenwich Resources and Westmount, gave ground.

Provident Financial, the credit group, tumbled 28p to 957.5p after Charterhouse Tilney said sell down to 800p.

SEAQ VOLUME: 837.2m

SEAQ TRADES: 61,970

GILTS INDEX: 105.87 +0.29

CRC, a computer repairer, returned at 147.5p after taking over AIDL (Automated Integrated Diagnosis), which repairs and services mobile phones. While the deal, a reverse takeover, was put together, CRC shares were suspended; last trade was 143.5p. To help finance the deal shares were placed at 145p.

PHYTOPHARM, seeking treatments from plants, continued to blossom, gaining 14.5p to 110.5p, a two-day gain of 30p. Rumours persist that the group is set to announce a licensing deal, probably relating to its eczema treatment, later this month.

INTER LINK Foods, making own-label cakes and pastries, is planning an AIM flotation through Wise Speke. Shares are being sold at 110p.

BEAUFORT, a management consultant, held at 1.25p after its finance director picked up 1,650,000 shares at 1.5p.