Market Report: Traders show relief as shares weather the storm

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The Independent Online
IT WAS not, after all, the Black Monday many feared. New York's Friday crash and the subsequent hysterical weekend bleating did at one time have the FT-SE 100 index down almost 100 points.

But selling was not heavy and once it became apparent that New York had opened on a firm note much of the nervous pressure evaporated and the index closed 56.3 points down at 3,419.1, the lowest for only three weeks. Datastream calculated the fall at pounds 14.25bn.

But the sharp setback has shaken confidence and should restrain some of the wilder enthusiasm that seemed destined to push shares, particularly little-known tiddlers carrying huge hope factors, to unsustainable levels.

Although the market performed better than many expected, trading in the next few weeks could remain tense. Some believe that the index, even if New York regains its momentum, should drift to nearer 3,350 to allow the US-inspired nervousness to escape from the system.

However, there is considerable relief that shares held up so well. One trader said: 'It should make investors more selective; perhaps they will now look for the recovery stocks rather than playing in stocks they hope will recover.'

Worries were particularly evident over emerging markets and some other overseas trusts. The fledgling overseas markets look exceedingly expensive and have been pushed higher, it is felt, too quickly.

If some of the foreign markets should start to crack, the new- style, emerging investment trusts could be stripped of their glamour.

There is also concern over the mushrooming derivatives market. It has grown dramatically since the 1987 crash and fears are evident that with its increased complexity and sophistication and much wider range of instruments difficulties could arise if shares lurch steeply downwards.

Government stocks had a bruising session, closing with falls of up to just over a point.

The modest US interest rate increase that created the setback has not shaken the belief that Britain's interest rates are heading lower. There is confidence that a half-a- point cut will be announced soon, with the more optimistic still prepared to bank on a full-point reduction by the spring.

British Aerospace skimmed 9.5p lower to 565.5p, pulled down by the market trend and expectations that John Cahill, chairman for 21 months, will quit soon. General Electric Co, where rumours of a BAe trading pact (or even a bid) are gathering strength, ended 1.5p down at 348p.

Glaxo Holdings shaded 2p to 664p. It was helped by the US Food and Drug Administration's decision to clear its asthma drug, Serevent.

BAT Industries managed to move against the trend, improving 5.5p to 516p, following results from its Brazilian off-shoot. Evidence that the US price-cutting war was easing also helped sentiment.

Pilkington, the glass group, was another to make headway, up 2.5p to 192p. Barclays de Zoete Wedd has lowered this year's forecast by pounds 10m to pounds 102m but is holding next year's estimate at pounds 128m, top of the range.

Granada fell 16p to 570p. Its contested offer for LWT (Holdings) is now worth 684p. LWT was unchanged at 702p as the market awaited a higher offer.

Euro Disney was another to achieve a plus, a rare distinction for the troubled theme park. The shares gained 13p to 378p. Stakis, on its elevation to the FT-SE 250 index, eased 1p to 86p.

Wakebourne, the old Maddox, gained 0.75p to 4p on the arrival of Leslie Warman as chairman, but Proteus, the computer drugs group which fell out with its stockbroker UBS last week, lost 22p to 368p on rights issue fears.

Blockleys, the building products group, jumped 12p to 83p but MR-Data Management fell 6p to 207p despite a buy recomendation from Matheson Securities, which looks for profits of pounds 10m followed by pounds 13m.

Abbott Mead Vickers, the advertising agency, displayed splendid indifference to the market tumble, gaining 27p to 660p. The shares were inspired by an award to handle a pounds 50m-a-year advertising campaign for BT. They have been stretching to new highs on hopes that Omnicom, the big US communications group, will mount a bid. It already has a 27 per cent interest.

Suter, the mini-conglomerate, has moved closer to the engineer James Wilkes. A bid, or at least a deal between the two, seems inevitable. Yesterday Suter, run by David Abell, said it had picked up 1.5 million Wilkes shares, lifting its stake to 29.53 per cent, just below the takeover trigger. Suter fell 10p to 210p and Wilkes, before the increased stake was announced, lost 4p to 139p.

The FT-SE 100 index dived 56.3 points to 3,419.1 and the FT-SE 250 index 69.3 to 4,077.1. Trading was busy, with 54,033 bargains from a relatively modest turnover of 894.3 million shares. The account ends on Friday with settlement on 21 February.