Market Report: US smoke signals boost tobacco shares

AMERICAN smoke signals suggesting the long-running health and tobacco litigation could soon be resolved provided a warm glow for tobacco shares.

British American Tobacco, the top performing Footsie constituent, rose 32p to 517p after touching 543p. Gallaher added 7p to 447p and Imperial Tobacco 19p to 664p.

There are hopes of a staggered settlement, with the tobacco groups paying damages over 25 years instead of having to accommodate the huge bills at the same time.

Tony Silverman at BT Alex.Brown said: "It would basically just work like a tax on cigarettes. Effectively it would be parcelled out to companies in proportion to their market share, so even those not being sued would have to pay their share."

BAT is the only one of the smoking trio to be directly exposed to the US lawsuits. Tobacco shares have performed well and, helped by their perceived defensive merits, are near to their year's highs.

Footsie got back to winning ways, achieving a 44.5 points (after 84) gain to 5,476.8. Small cap shares were also in form but the mid cap index posted a modest fall.

The stock market was relieved by better-then-expected results from Cable & Wireless, up 8p to 656p, and insurance group CGU, 36p higher at 929p. British Energy, up 37p to 620p, reflected profits above forecasts.

Carlton Communications and Granada failed to join the Footsie revival. Worries about problems at ONdigital, their joint television venture, did the damage. Carlton fell 19.5p to 403p and Granada 19p to 886p.

Prudential Corporation, after talking to analysts about its Egg financial services operation, rose 18.5p to 820.5p.

Diageo, the Grand Metropolitan/Guinness group, rose 24p to 619p in response to the go-it-alone decision by Seagram, the Canadian spirits giant which, it was felt, would link with Allied Domecq to create a powerful challenge to the new spirits colossus. Allied also looked on the bright side with a 3.75p gain to 520p in brisk trading.

Marston Thompson & Evershed, the Pedigree bitter brewer, frothed 32.5p higher to 231p after Wolverhampton & Dudley Breweries, unchanged at 419p, duly confirmed it was thinking about bidding. There was also talk of a financial group stalking the Burton-on-Trent group.

Heritage Bathrooms jumped 44p to 196.5p after an approach signalling a possible bid of 220p a share, and Crabtree, an engineer, rose 7p to 48.5p as LTG Technologies produced a 50p cash or one-for-one share exchange offer.

Celtic, where a consortium headed by football personality Kenny Dalglish and singer Jim Kerr is trying to buy control, improved 15p to 307.5p.

Tate & Lyle, the sugar group where corporate activity is widely expected, was back in demand, up 30p to 354p. The shares, 580p in the spring, have been weighed down by trading worries but put on some intriguing performances in the past month.

Booker, the cash and carry chain devastated by a profits warning on Tuesday, achieved a 0.75p gain to 65p. After the market closed it was announced that a director, John Napier, paid 68p a share for a parcel of 250,000, taking his stake to 1 million shares (0.4 per cent).

The performance of Countryside Properties, the house-builder, is worrying some observers. The shares shaded to 68p, a 12-month low. The group is one of the few in the building sector to fail to draw strength from the interest rate reductions. Interim profits were sharply higher and the market seems to be looking for year's figures around pounds 13.8m, which would compare with pounds 9.3m.

Westmount, the little oil group, held at 35p. On the back of its shareholding in Desire Petroleum, seeking oil and gas off the Falkland Islands, the shares touched 275p in the summer. Chairman Derek Williams seems to have handled his Desire investment better than some investors. When Desire was flying high, the shares reached a 445p peak, he decided to trim his stake. He sold 110,000 at 300p each, leaving 14 per cent which cost pounds 150,000.

HW, a recruitment group, held at 81p. Maiden interim figures are due next week. A 50 per cent gain to around pounds 1.9m is expected. The group arrived in the summer at 160p. The share have fallen steadily.

Bilton, the besieged property group, firmed 2p to 293.5p. Bidder Slough Estates has increased its stake to 28 per cent. It is thought that Schroders, the second largest shareholder, cut its interest to 17.6 per cent, selling 13.5 per cent at the cash offer of 307p. Slough was little changed at 289p.

Inner Workings was the day's worst performer. The shares fell 12p to 47.5p, unsettled by a placing of 3.4 million shares at 35p, raising pounds 1.1m. The fall reflected the big discount of the placing to the then ruling market price.

SEAQ VOLUME: 858.3m

SEAQ TRADES: 59,577

GILT INDEX: n/a

GRAHAM, hit recently by profit downgradings, held at 129p. There are whispers that a predator is hovering and could take advantage of the weak share price. One suggestion is that CRH, the Irish building materials group, could be tempted into bidding for the builders' merchant. The shares touched 191p in the spring. Profits of around pounds 25,5m are expected, which would compare with pounds 21.3m last year and only pounds 10.7m the previous year.

THE ENGINEER Solvera, formerly OMI International, firmed to 8p as the threatened shareholders rebellion was called off. Shareholders who wanted to remove chairman Richard Duggan and put John Munro on the board have abandoned their calls for a special meeting.

After talks with Mr Munro and other shareholders, including AIM-traded Mountcashel, Mr Munro is joining the Solvera board.