The FT-SE 100 index fell 20.3 points to 2,818, with BAT Industries and Guinness weighing heavily on a stock market already softened by rumours of billion-pound rights issues.
BAT slumped 33p to 926p, lowest this year, as the fear grew that the Clinton administration in the US will soon impose savage tax increases on cigarettes and tobacco. And just to add to its discomfort, BAT had to contend with a short-lived story that it would emerge as the long-suspected bidder for the TSB banking group.
But it was the tax impact, with some talking of a 50 per cent increase, that did most of the damage. The known Clinton dislike of tobacco added fuel to the story. Rothmans International was also hit, down 18p at 603p.
Guinness lost 12p to 456p as analysts expressed concern about champagne sales by its 24 per cent-owned associate, LVMH. The French group, which embraces most of the top champagne marques, has cut some of its prices in a bid to improve sales.
Morgan Stanley, the US house, was quick to lower its expectations and Barclays de Zoete Wedd, anticipating lower LVMH projections by its French affiliate, chipped its Guinness profit forecast by pounds 5m to pounds 975m.
Glaxo Holdings and Imperial Chemical Industries remained under the rights issue whip. If the two made big cash calls in quick succession it would demoralise the market. Many observers think ICI will launch a massive rights issue tomorrow, with its results and details of the Zeneca demerger, and any Glaxo development is unlikely for some considerable time.
Barclays, the banking group, British Airways and Royal Insurance are others in the rights frame.
The National Westminster results did nothing to relieve the Barclays unease, helping the shares to fall 21.5p to 427.5p. NatWest lost 16p to 443p. TSB, after early progress on the BAT rumour, ended 1p off at 173p.
A confident trading statement from Grand Metropolitan seemed to be outweighed by a fractious shareholders' meeting and the shares fell 6p to 445p. Unilever's figures left the shares 14p higher at 1,160p.
Insurances suffered from ripples in the US suggesting premium increases were proving difficult to implement.
BET, the business services group, slumped 8.5p to 88.5p. Hoare Govett sharply reduced next year's profit expectation from pounds 100m to pounds 81m. This year's estimate is held at pounds 70m. James Capel is looking for a dividend cut from 6.5p to 4p.
Food retailers were ruffled by suggestions that some large lines of stock hovered. Tesco seemed to be the main casualty, although late trades relieved the pressure and the shares closed off their worst, down 6p at 238p.
Lloyds Chemists shaded 2p to 275p as Royal Insurance said it had sold 3.84 million shares (3.26 per cent), reducing its stake to 88,074 shares.
Vodafone Group dipped 8p to 380p following a US presentation by Goldman Sachs. Amstrad, the electronics group, put on 4p to 29p on its unexpectedly good trading performance and dividend payment.
The firm oil price provided some support for oil shares, with British Petroleum up 6p at 276p.
Talk of takeover action continued on the property pitch. Hammerson was again in demand. The voting shares rose 6p to 330p and the low-voting 'A' shares 12p to 316p. British Land, the suggested bidder, held at 230p
Stakis, the leisure group, edged forward 1p to 46p, as its pounds 29m rights issue was 93.26 per cent taken up and the rump placed at 44p.
Stylo, the shoe retailer, held at 125p. M&G Second General Trust now has just under 9 per cent. A fund manager at the group said: 'We do know the company and see a move back to break-even this year with possibly good news on the dividend.'
Aberdeen Petroleum firmed to 13.75p as Pittencrieff lifted its stake to 19.1 per cent. Pittencrieff lost 19p to 341p.
Amberley Group, the building preservation group, gained 10p to 33p, reflecting hopes of takeover action following the shareholding shuffle.
Some of the recent outperformers among the small fry ran into profit-taking. Cannon Street Investments fell 1.5p to 9.75p and Ticketing Group lost 0.25p to 2p. Speculators in Castle Mill International, where revamping action is confidently expected, grew tired of waiting and took profits, pushing the shares 1.25p lower to 11p.
The stockbroker Pilling & Co expects Colorgen's recovery to continue. Like many London-traded US groups, the maker of computerised colour-matching systems has found the going difficult. But Pilling expects good interims and forecasts a move into 'the realms of impressive growth'. Year's earnings could be 6.6 cents a share against 5.5. The shares are 39.5p.
Nick Berry, son of the former Daily Telegraph owner Lord Hartwell, has emerged as a big shareholder in Kunick, the struggling fruit machine and nursing home operator. Through his Stancroft Trust investment vehicle, he has bought 10 per cent of Kunick's preference shares and 6 per cent of the ordinary shares. Yesterday the ordinaries fell 0.25p to 5.5p and the prefs stuck at 56p.
Alvis, the old United Scientific Holdings, edged ahead 1p to 28p yesterday, reflecting sudden interest in its 51 per cent-owned, quoted Singapore subsidiary, Avimo, a maker of gun optics. This week Avimo shares moved ahead, pricing the Alvis stake at pounds 33m. Alvis, which is valued at pounds 15m, has attempted to streamline its operations and is regarded as a classic recovery stock.Reuse content