Market Report: Worries about rights issues take their toll

THE stock market, as measured by the FT-SE 100 share index, was back to its Tory election peak yesterday.

Proposed German tax changes and rights issue worries pushed the index down 25.5 points to 2,737.6, just a shade below the best level hit when shares celebrated the election upset.

After peaking in May, the index drifted downwards before starting the autumn run, which took it to the record 2,861.5, hit on the first trading day of the year.

The German move could lead to a 30 per cent withholding tax on overseas investments, which would make it more difficult for the Government to undertake its already demanding schedule of gilt sales. They continue next week with a pounds 2.5bn auction.

The rights fears have hovered over the market since the start of the year, helping to smother the festive enthusiasm.

A wide spread of companies have been caught up in the rights rumours, including Allied-Lyons, British Petroleum and Unilever.

The hovering presence of some chunky lines of stock also depressed sentiment. NatWest Securities placed 2 million Wellcome, enough to arrest a modest advance prompted by profit upgrades following investment meetings.

The analyst Robin Gilbert, who joined Panmure Gordon from James Capel on Monday, has lifted his profit forecast for this year from pounds 650m to pounds 670m, some pounds 20m ahead of the revised Barclays de Zoete Wedd estimate. For the following year Mr Gilbert, who expects Wellcome to introduce a number of new drugs, is looking for pounds 810m.

Glaxo Holdings, down 27p to 701p, was unsettled by a big placing in the US and worries that a number of US pharmaceutical companies will hit already fragile sentiment when they report results in the next few days.

Stores had to contend with the latest Confederation of British Industry survey. Burton Group fell 4.5p to 71p and Marks & Spencer 7p to 312p. Amber Day, the controversial What Everyone Wants chain, slipped 1p to 49p though Julie Ramshaw, who first spotted the recovery potential of Next, believes the shares should reach 75p in the next year. 'It is safe to resume buying,' the Morgan Stanley analyst said.

British Aerospace improved 9p to 194p on the Taiwan deal and Rolls-Royce gained 4.5p to 116.5p.

Cadbury Schweppes edged ahead 4p to 460p on talk Hanson could be interested in bidding. This week NatWest drew attention to the likelihood that Hanson will seek to buy UK operations with better growth prospects than bulding and tobacco.

The engineer APV edged ahead 5p to 124p on the feeling it could attract Siemens, the German group, which has made no secret of its UK expansion plans.

A raft of downgradings took their toll. Credit Lyonnais Laing left Thorn EMI down 15p at 843p by clipping pounds 10m from this year's estimate to pounds 340m and next year's by pounds 31m to pounds 363m. Courtaulds was lowered 14p to 544p as UBS Phillips & Drew was rumoured to have reduced this year's forecast from pounds 200m to pounds 187m.

Charterhouse Tilney dropped its English China Clays predictions from pounds 90m to pounds 85m and pounds 110m to pounds 90m and Hoare Govett came down on Farnell Electronics, cutting from pounds 36.5m to pounds 35.5m and pounds 42m to pounds 39.5m.

BT fell 6.5p to 377.5p. Capel reduced this year's estimate from pounds 2,630m to pounds 2,588m. Smith New Court unsettled BET, down 4p at 95p.

But bullish noises were heard. BZW likes Coats Viyella, the textile group, and Unigate scored from an analysts' visit. Unilever drew further strength from its presentations. Rank Organisation improved on hopes that the US Xerox reorganisation indicates an eventual bid for full control of Rank Xerox, the office equipment group it runs with Rank.

On the longer betting shop hours, Ladbroke Group was unchanged at 189p although it attracted more call options - 788 contracts - than any other stock.

Kelt Energy rose 4p to 25.5p. It opened its Caythorpe gas field in North Humberside, the first onshore UK field to be developed to compete with British Gas.

The FT-SE 100 index ended near its lowest of the day, down 25.5 points at 2,737.6. The FT-SE 250 index retreated 9.8 to 2,885.9. Trading perked up a little with turnover again moving above the break-even level, reaching 557 million shares with 26,834 bargains. Government stocks were little changed.

Aminex, the recovering Irish oil group, has mounted a hostile pounds 2.74m share bid for Tuskar Resources. With Tuskar's assets consisting largely of shares in an Australian resources group and cash, the Aminex assault could be regarded as a disguised rights issue. Tuskar shares, at one time almost 100p, are suspended at 1p. Aminex was suspended yesterday at Ir6p.

Ossory Estates, the struggling property group, could be heading for more positive times. The shares rose 1.75p to 8.25p yesterday on talk the long-mooted reconstruction has almost been put together. The group has had a depressing time. Last month it announced losses of pounds 41.6m in the year to June after heavy write-downs. Assets were then put at 19p a share.

Nurdin & Peacock, the cash and carry wholesale group where SHV, the Dutch investment group, lurks, rose 3p to 188p yesterday. But NatWest Securities is adopting a bearish stance. It points out that N&P operates in an increasingly difficult market and there is no sign of takeover dialogue with SHV. Profits last year could edge ahead to pounds 28.4m, reaching pounds 29.2m this year.