Market Report: Trading set to break free from stifling BT3

SHARES are expected to celebrate their escape from BT3, the pounds 5bn- plus government sale that has stifled stock market interest since it was launched with the traditional fanfare eight weeks ago.

Dealings in the new shares will start on Monday and many forecast that once the weight of BT3 is removed the stock market could move ahead.

The signs are that many institutional and private applications will be scaled down, which should at least leave the rejected cash seeking accommodation.

During the period Inspector Morose and SG Warburg have been promoting the sale the FT-SE 100 index has edged forward 7.4 points to 2,833.

Since the new-style US book- building got under way at Warburg earlier this month, the Footsie had, until yesterday, managed just one advance - and a modest one at that.

The closure of BT3 brings to an end an exceedingly exhausting time for the market. Cash calls this year, including the pounds 1.3bn Zeneca drugs group's rights issue, have reached pounds 6.5bn and new issues amounted to more than pounds 1bn.

Many are hoping that after a pounds 13bn hit in less than seven months cash demands will dry up, at least for a time.

However, many balance sheets still need repairing and there is a lingering suspicion that a number of blue chip companies have sigificant international takeovers in mind which would require rights issues. The possibility of British Petroleum hitting the market with a huge call remains in the background.

The new BT shares are expected to open at about 170p, although there are hopes of a 175p level. But the premium may be short-lived, with scaled-down institutions not rushing to mop up selling by private investors.

The market, befitting the last day of BT3, meandered uncertainly with the FT-SE 100 index turning an early 9.3-point fall into a 1.3 gain to 2,833 by the close.

The suspension of Resort Hotels, the subject of new time buying ahead of figures expected next month, cast a shadow, with Friendly Hotels lowered 21p to 198p.

Drug shares also suffered - courtesy of the US investment house Smith Barney, which repeated its cautious view of the industry. Glaxo Holdings fell 14.5p to 538.5p; SmithKline Beecham 6p to 415p and Wellcome 16p to 634p.

Oils were also fretful, with worries about the crude price and Iraqi sales doing the damage. Enterprise Oil fell 8p to 437p and Shell shaded 1p to 611p. Pittencrieff lost 10p to 293p as US buying evaporated.

After crumbling for the past two weeks food retailers perked up, with J Sainsbury gaining 15p to 442p in often busy trading. Argyll, the Safeway chain, put on 5p to 308p and Tesco 2p to 200p.

But Asda, which started the weakness with comments about supermarket overcapacity, was 0.5p off at 60p. The shares were 71.5p before Asda questioned the strength of the supermarket spread.

Great Universal Stores' non-voting 'A' shares continued to reflect their pending more powerful status with a 35p advance to 1,910p. But the voters declined 38p to 3,400p.

Brown & Jackson, the Poundstretcher group in the throes of a pounds 21m rights issue, gained 0.5p to 13.5p as Societe Generale Strauss Turnbull said buy. It forecasts profits of pounds 500,000 this year and pounds 10.5m next.

British Airways rose 6.5p to 312.5p, with US investors returning. Smith & Nephew, the healthcare group, dropped 3p to 140.5p as a US competitor, Surgical Corporation, reported a second-quarter loss.

Properties were again the best- performing sector, with British Land up 9p at 352p and Evans of Leeds 10p higher at 185p. McKay Securities celebrated its agreement with its bankers with a 5p gain to 115p. P&O, reflecting its property interests, put on 13p to 633p.

Micro Focus, the computer group, jumped 42p to 1,890p as NatWest Securities described the shares as 'deeply undervalued'.

Standard Chartered, the banking group, retained its position as the current takeover favourite, gaining 15p to 848p. The shares have climbed 48p this week as rumours have swirled of a Far Eastern strike. Some, however, wonder whether Standard will utilise its share strength for a cash call.

Bellwinch, the builder, held at 26p. Redrow, the unquoted group paying pounds 23m for the Costain building division, has a 12.71 per cent stake. It had been expected to come to market through a reverse takeover of Bellwinch but many now believe the stake could be for sale.

The account ended with the FT-SE 100 index up 1.3 points at 2,833, but the FT-SE 250 index fell eight points to 3,217.5. Turnover was 628.8 million shares with 31,036 bargains. Settlement is on 26 July. Government stocks were subdued.

The reverse takeover that would give the leisure entrepreneur Adam Page control of Hoskins Brewery has run into problems. David Shaw MP has quit as a director, and documents outlining the deal, expected yesterday, failed to appear. Hoskins shares were suspended in May at 56p. A statement is expected next week indicating that the deal is taking longer to put together than anticipated.

Britton Group, once Firstland Oil & Gas, is expected to return to market on 2 August. The shares were suspended at 14.5p while a placing, intermediaries offer and rights issue raised pounds 31.4m for the takeover of a Cheshire polythene film maker. The intermediaries offer was 2.1 times subscribed. The revamp is being masterminded by Robin Williams and Simon Beart, formerly at Salomon Brothers.

Gaelic Resources, one of the roller-coaster Irish oil stocks, is banking on oil technology to provide the breakthrough exploration has yet to produce. It has taken on Vis-breaker, an as-yet unproven device designed to make heavy oil easier to transport. Gaelic should know within 18 months whether it is on to a winner. It continues to explore in Eire, India and Pakistan. The shares are 2p.