Market Report:Run of bad news ends a bleak year for blue chips

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The Independent Online
This year has been a wipe-out for blue chips. The FT-SE 100 index closed at 3,679.5 points, 9.8 below the level it started the year.

The stock market has clearly found the latest run of poor trading news too much to handle. Although hopes are running high for profits next year there has been a series of high-profile downgradings, such as Imperial Chemical Industries. And the wounding speculation about whether BTR will be able to hold its dividend has taken its toll.

The fragile atmosphere was ill-prepared for the self-imposed demolition job from Wickes, a sort of do-it-yourself builder's merchant. Its shares officially opened at 109p although there was an overnight trade at 80p. They were quickly suspended at 69p, but not before other City professionals had escaped at prices as low as 65p.

The hesitancy was not helped by rumours that a large investment house had turned negative on market prospects and aggressive futures selling by Barclays de Zoete Wedd and Merrill Lynch. The political uncertainty, heightened by the Portillo rebellion, sliced into already taunt nerves.

The dramatic slowdown in investment interest has left the market long of stock, leaving market-makers little choice but to lower prices.

Unlike many earlier retreats blue chips were not alone in their suffering. The rest of the market was hit, with second and third-line prices crumbling.

Conglomerates, largely due to BTR's difficulties, floundered. BTR continued its debilitating retreat, down to 246p, off 9p. The 1995/96 warrants went further out of the money, off 3p at 5p. They offer the right to buy shares at 258p.

BTR's difficulties put the Hanson demerger under even more pressure, with the shares falling 5p to 174.5p, a 12-month low. Some analysts have suggested a near-240p demerger valuation.

Other congloms looking less than happy included Tomkins, off 3p at 236p, Wassall 4p at 286p and TT, involved in a controversial tender offer for the Johnston building materials group, 3.5p to 347p. Caradon lost 6p to 221p.

Grand Metropolitan was one of the few blue-chips to ignore the gathering clouds. In brisk trading the shares rose 7p to 419p, against 464p at the turn of the year.

Stories of a US break-up bid, splitting the food and drink sides, continue to intrigue; there is also a persistent suggestion that Guinness could become involved in any action, perhaps bidding for the wine and spirit division.

The group has admitted it looked at the possibilities of a break-up but concluded it would not be in shareholders' interests. However, the market believes the decision could be taken out of Grand Met's hands. Its weak share performance - the price hit a 506p peak four years ago - leaves it vulnerable to a strike.

Sun Life & Provincial continued to demonstrate how not to handle a flotation, with the price falling 11p to 221p, a yawning 14p gap from the issue price.

Reuters, ahead of investment meetings, rose 4p to 764p, and BT lost 7.5p to 3349.5p, with Dennis Exton at Nikko wondering whether telephone groups could be overwhelmed by the Internet explosion.

Amstrad surged 36p to 184p on the possibility of a takeover bid from Psion, the hand-held computer group, off 25p at 350p.

Argyll, the Safeway chain, fell 6p to 336p. Nick Bubb at Mees Pierson says the group, after nearly being squeezed out by its rivals, has become a strong player. He sees profits of pounds 450m this year with pounds 513m next.

Prudential Corporation added 4p to 409p as it confirmed it intended to float Mercantile & Marine. It is expected to sell 40 per cent of the reinsurance company.

Lucas Industries put on 4p to 231p in brisk trading, re-awakening suspicions that a major group will barge into its merger with Varity, the US car parts group.

Television shares stirred on suggestions that Scottish TV is talking to Grampian. Scottish lost 14p to 678p.

Credit Lyonnais Laing, ahead of next month's defence contracts, alighted on British Aerospace and Hunting as beneficiaries. BAe added 3p to 993p and Hunting was little changed at 179p.

Norbain, Europe's largest closed circuit TV distributor, gained 13p to 538p after a 28.3 per cent profit increase to pounds 5.3m. Panmure Gordon expects pounds 6.4m this year.

Anglo United, doubled to 1p on hopes it will get some benefit from the expected Falkland Islands oil boom. Pan Andean was little changed at 85p; an encouraging statement on its Bolivian oil adventure is expected in the next two weeks.