Market Report: Supermarkets' rally proves short-lived

SUPERMARKETS came under renewed selling pressure as rumours of profit downgradings circulated and some big lines of stock were said to be on offer.

The food retailers have had a torrid time as worries have intensified that the days of heady growth are coming to an end.

Fears have mounted that too many supermarkets are being opened at a time when margins are already being squeezed by the growing army of discount operators.

Already Continental groups are undercutting the supermarkets; now there is the additional threat from US-style discount clubs with Nurdin & Peacock, the cash and carry wholesaler, in the forefront of the challenge.

There had been signs that supermarket shares, which have underperformed the rest of the market, were beginning to recover from the depths of despair. Last week Barclays de Zoete Wedd made positive noises and launched US-style warrants on the sector.

But the hesitant rally evaporated. Argyll fell 8p to 297p and Tesco lost 4p to 209p. J Sainsbury dropped 10p to 427p. Asda, where there was talk of a big line of stock overhanging the market, retreated 1p to 56.5p.

The rest of the stock market gave ground with the FT-SE 100 index down 7.5 points to 3,094.7. An early advance soon petered out as institutional investors decided to sit on the sidelines ahead of today's retail price index.

The two leading Anglo-French shares remained under the whip of cash-call worries. Euro Disney lost 22p to 588p, a new low, and Eurotunnel fell 29p to 459p.

Building and related shares were overshadowed by fears of public spending cuts in next month's Budget. George Wimpey, which also had to contend with a sell recommendation from SG Warburg, was particularly weak, falling 11p to 159p.

Drink shares were overshadowed by the shake-ups at Grand Metropolitan and Guinness.

Grand Met's failure to hold on to the lucrative US agency for the Swedish Absolut vodka, thought to be worth profits of pounds 40m a year, left the shares 15p down at 403p; the departure of Guinness's spirits chief, Crispin Davis, was largely responsible for a 7p decline to 396p.

But the spirit and stout group was also ruffled by continuing speculation about its future relationship with LVMH, the French brandy and champagne group.

Invergordon Distillers was firm on bid hopes.

Rupert Mudoch's prediction that BSkyB will make profits of at least pounds 180m this year helped the TV network's minority shareholders, with Granada up 15p at 487p and Pearson putting on 14p to 542p.

Arjo Wiggins Appleton, with an analysts' meeting accompanying news that it is getting a Paris share quote, was firm at 228p.

P&O, up 6p at 594p, enjoyed support from BZW. BT edged forward 1p to 445p on a presentation for the Cellnet mobile telephone service. Cable and Wireless drew comfort from another strong advance by its Hong Kong Telecom offshoot as the colony's market made further headway. The shares rose 18p to 911p.

Standard Chartered, the banking group, shrugged off worries of a Hong Kong probe, gaining 15p to 1,008p, a new high.

Geest, the fresh food group, shaded 3p to 383p. The founding Van Geest family sold more shares.

ADT encountered late selling, dipping 21p to 560p. The yearly shareholders' meeting was due to be held in Bermuda and there are fears of a cautious trading statement.

There are also worries that the controversial car auctions and security systems group, run by Michael Ashcroft, could part company with its biggest shareholder, Laidlaw, the Canadian group.

Last week Laidlaw's chief executive departed, raising fears that the group's 24 per cent interest will be offered around.

Since the Laidlaw shake-up ADT's shares have fallen 63p.

A profit warning from Plysu, a plastics group, hit the shares, which lost 20p to 220p.

Eleco, maker of building materials, jumped 13p to 45p. The resignation of the finance director, Eric Woolley, prompted speculation that the long- rumoured takeover bid may be about to materialise.

But the arrival of administrative receivers at two subsidiaries of hard-pressed Ossory Estates chipped the shares 1.25p to 4.5p.

The company said the receiverships would 'not be to the detriment' of the reconstruction plan now being prepared.

Crockfords, the casino group which arrived through a reverse takeover of TV-AM, attracted attention, improving 9p to 107p.

The shares made a rather subdued return but with heady profit forecasts circulating, demand appears to be increasing. Ladbroke continued its revival, improving 7p to 189p.

Shares were subdued with the FT-SE 100 index falling 7.5 points to 3,094.7 and the FT-SE 250 index off 7.3 at 3,474.9. Turnover was 537 million shares with 29,983 bargains. The account ends on Friday. Government stocks were firm.

An agency cross of 100,000 Tottenham Hotspur shares intrigued the market. Some are wondering whether Spurs' low- performing stock market days are over and the shares could start to narrow the gap with Manchester United, near their peak at 592p, now Alan Sugar has strengthened his position at the club. The shares rose 9p to 110p. In July 1987, they hit 249p.

Cooper Clarke, a builder's merchant, fell 10p to 90p. The company, which said in July it had no immediate plans to go private, is planning to give up its USM presence. Two directors and a former director have 72.68 per cent of the shares. It appears they are not prepared to bid for the rest of the capital. Instead the shares will be traded on the rule 535 market.