Market Report: Trading fears knock M&S

MARKS & SPENCER had a day to forget, as rumours of poor trading and whispers of a dividend cut encouraged a wave of selling.

As most other FTSE 100 stocks kept their cool in the face of the expected no change in rates, Britain's premium retailer struggled, ending 14.75p lower at 380.25p. A deluge of bad news did the damage.

First on the block was the announcement that William Baird, M&S's biggest supplier, had suffered a dip in profits in 1998 and was forecasting a tough first half.

Baird itself shed 4p to 105p, sparking concern about M&S clothes sales. Panicky dealers talked of "negative double-digit" like-for-like sales at the start of the all-important spring season.

One or two brokers added to Marks & Sparks' misery by reawakening the spectre of a dividend cut with the final results, due out in June. On current forecasts of a 14.4p divi, the payout will only be covered one time and the Square Mile is starting to fret. Balance sheet worries were compounded when Moody's, the ratings agency, downgraded the retailer's debt.

HSBC put the seal on a truly awful session by repeating its "reduce" advice. The stock, which topped 600p in April, has lost over 9 per cent in the last three days as the market view got gloomier and gloomier.

If the trend continues, the title of a recent analysts' note on the new management's restructuring efforts, "It's going to be painful", could be inscribed on M&S' Baker Street headquarters.

The FTSE 100 had a relatively painless day, finishing 13 lower at 6,048.3. The blue chip index shrugged off the Bank of England's decision to keep rates on hold and remained in positive territory for most of the day, thanks to a robust opening on Wall Street.

However, when the Dow turned negative, the FTSE 100 followed suit ending with a small deficit. The FTSE 250 outdid its bigger brother once again, posting a 9.6 rise to 5,286.9. The Small Cap was also resilient, finishing 6.2 ahead at 2,282.5.

The undercard's bid speculation centred on British Borneo. The oil exploration group, which last year bought rival Hardy, drilled an 8.3 per cent increase to 105p in heavy volume.

The rumour is that a US predator is mulling a hostile bid of up to 180p a share to exploit Borneo's depressed price. The stock reached 522p a couple of years ago and has since been hammered by the falling oil price.

Talks of a merger with rival Lasmo also did the rounds as dealers reported aggressive buying from three big brokers. Merril Lynch, who reiterated its "buy" advice, was said to be among them.

Borneo pipped GKN as the best riser in the top 350 companies. The aerospace engineer took off with a 62.5p jump to 910p. Analysts were impressed by the better-than-expected results and confident outlook for this year.

GEC, up 29 to 565p, remained in demand as the market awaits the next acquisition, following this week's purchase of the US telecom group Reltec.

The insurers were having a love-in with the analysts. Royal & Sun, results today, soared 17.75p to 551p as ABN Amro suggested a switch out of Norwich Union, down 0.25p to 451.5p. CGU, up 27.5p to 955.5p, was also on ABN's wish list. Legal & General, up 25p to 774.5p, got the nod from Cazenove. Britannic spoiled the insurers' party with a 97p plunge to 1065p after a set of mediocre results.

Powergen, figures today, rose an electrifying 24p to 787p amid vague talk that it might buy a second regional electricity company.

Fellow utility Energis, a FTSE 100 candidate, powered 120p ahead to 1,580p after announcing a Northern Ireland telecom joint venture with the local electricity group Viridian, up 24.5p to 733p.

Hays, the services group, benefited from some switching out of rival Rentokil, which on Tuesday failed to meet its earnings target. Predictably, Hays rose 21.75p to 626.5p and Rentokil lost 2.75p to 396.25p. Railtrack was derailed by profit-taking, losing 75p to 1,.455p.

Food retailers went sour as the threat of a price war looms large. Tesco was first in the check-out queue with a 5.5p fall to 163p. Sainsbury offloaded 11p to 353p while Safeway dropped 7.75p to 256p as CSFB advised to sell. Morrison, the Northern chain, shed 7.5p to 296.5p.

The stores' black day was completed by Arcadia, down 18p to 213p. The broker Kleinwort Benson put a "sale" sign on the Burton off-shoot and reduced its forecasts. Merrill Lynch also hovered with talk of a 1m line of shares on offer.

Wates City, the property group, climbed 6.5p to 72.5p. Its major building City Point in the Square Mile is near completion and should add a further 30p to the share price.

Torotrak, the maker of a revolutionary gearbox, roared 26.5p ahead to 130p after pledging to win 80 per cent of General Motors' automatic transmission orders.

Bula Resources, the oil group, was boosted by the appointment of the former Irish prime minister Albert Reynolds as chairman rising 0.25p to 1.25p.

SEAQ VOLUME: 991.2M

SEAQ TRADES: 76,228

GILTS INDEX: 112.25 -0.72

NIGEL WRAY, the property and sports tycoon, is about to embark on an unusual venture. Yesterday, he disclosed an 11.4 per cent in Frank Usher, a long-suffering maker of evening dresses. Usher, which closed up 7p to 11.5p, is considering appointing the entrepreneur to the board. Mr Wray who owns the rugby team Saracens and made its fortune in the property world with Trocadero, is not a clothes expert. However, he has an eye for undervalued companies.

PPL THERAPEUTICS, the company that cloned Dolly the Sheep, is near to clinching a key deal for one of its major drugs. The shares soared 9p to 107.5p yesterday amid talk that PPL has found a US partner for its cystic fibrosis drug. The partner, believed to be a large pharmaceutical company, will shoulder a large chunk of the drug's clinical trials, reducing PPL's development costs. The company recently published encouraging results for the drug.