MARKET REPORT: Wellcome relief from interest rate blues

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The Independent Online
The FT-SE 100 index slumped 33.6 points to 2,995, and the FT-SE 250 lost 24.7 to 3,424.6. Share volume was 630.5 million with 19,441 bargains. Government stocks were a shade easier.

Higher interest rate fears sent the FT-SE 100 index crashing below 3,000 points as most investors sat nervously on the sidelines.

The index ended 33.6 lower at 2,995. It is the first time for five weeks that it has closed below what is generally regarded as a crucial support level.

Economic figures published this week have hardened the case for another interest rate increase and sentiment has also been undermined by the higher mortgage announcements.

With New York deep in the doldrums - US rates may be lifted early next month - there were few crumbs of comfort for what is becoming a tortured, unwilling stock market.

Internationals were also casualties of the dollar, which came under intense pressure.

There was, once again, very little selling, but buyers were conspicuous by their absence. For much of the session market-makers, still adopting defensive positions in the wake of the £800m Goldman Sachs programme trade, had the field to themselves and they, it is generally acknowledged, are happy to nudge prices lower.

This week the 100 index has fallen more than 50 points in thin, hesitant trading.

One of the "crumbs" offering interest was Wellcome, 4p better at 688p (after 697.5p), as the story that Glaxo was about to pounce gathered strength.

Glaxo added to the excitement by sheltering behind the traditional "no comment" response. Warner Lambert, a US group, was also put in the Wellcome frame.

There has been busy trading in Wellcome shares with talk of stake-building ahead of a bid, thought likely to appear on Monday. The Wellcome Trust, with 39.7 per cent, is believed to be a willing seller at an acceptable price. When it last cut its shareholding, the trust obtained 800p a share.

Glaxo, ran the story, had agreed the finance to buy out the trust and would then make a cash-and-share offer for the rest of the capital. Glaxo fell 18.5p to 643.5p.

The takeover euphoria at SG Warburg evaporated, with the shares down 14p at 731p; Kleinwort Benson lost 4p to 574p.

Electricities displayed a spark of life, responding to the regulator's decision to allow them to generate more electricity. Share buybacks also helped. London Electric, up 7p at 717p, completed a 6.5 million buy-in at 705p through Warburg, and Eastern, through Cazenove, picked up 7.7 million shares at 720p, leaving the price just 3p brighter at 731p.

Vodafone, weak for much of this month, fell 4p to 187.5p. Worries are growing about the increasingly fierce competition it is facing from Cellnet, the BT/Securicor rival. Racal Electronics, Vodafone's former parent, was little changed at 226p. There is talk of a presentation at Smith New Court on Monday evening.

British Airways continued to weaken as its associate USAir said its delayed figures would appear next week; the shares fell 10p to 359p.

The two-way pull over Guinness swung in favour of the bulls as optimistic noises from Hoare lifted the shares 3p to 418p Kingfisher slipped to 399p with talk that management changes are due to be announced.

Rank Organisation, down 5p to 385p, is offering 1,200p for the minority in A Kershaw, which is paying a 120p dividend. Kershaw, for years a market oddity with Rank owning 86.2 per cent, rose 42p to 1,295p.

Hobson, the food group, edged ahead 0.75p to 25.25p, as Smith New Court produced a buy note and its chief executive, Andrew Regan, confirmed he was on the look-out for acquisitions.

Smith also offered a helping hand to the textile group William Baird, up 6p at 226p.

T&N, the car components group, continued to give ground, down 6.5p to 140p.

The group, which met analysts this week, faces £100m of asbestos-related provisions and is expected to sharply reduce its dividend.

Vickers, the engineering and Rolls-Royce cars group, rose 5p to 177p, with Cazenove said to be offering support.

Essex Furniture continued to weaken, down 8p at 138p. Earlier this week the company said it was trading well.

Bearing Power rose 2p to 24.5p on its plan to hand shares in its quoted Canadian off-shoot to shareholders.

CIA, Britain's largest independent media buyer, is continuing its rapid expansion. Its next deal is thought to be the acquisition of a German media buying business, which could be clinched next week. Through takeovers and joint ventures CIA has spread through Europe; 18 months ago its operations were confined to this country. The shares held at 130p.

Powerscreen International, a screening, crushing and recycling equipment group, bucked the market trend, edging forward 2p to 252p in active trading. The acquisitive group has increased organic sales by 20 per cent in its first nine months and is on target to hit £28m this year against £24.6m. Its cash pile approaches £10m, which could encourage further expansion.

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