Rolls-Royce flying high as another peak is reached

MARKET REPORT

Shares stretched to another closing peak with Rolls-Royce, the best performing blue chip, flying high on hopes that a big Far Eastern order will be announced today.

The aero engine group climbed 7p to 195p - a 12-months peak - as the stock market ran with the story that Malaysian Airlines is due to order Rolls-powered Boeing 777 aircraft. It is estimated the Boeing-Rolls deal could be worth pounds 2.5bn.

Malaysian Airlines has in the past followed in the flightpath of Singapore Airlines, which recently settled for 777s with Rolls engines.

The aero group could also benefit from expected aircraft orders from the Philippines and South Africa.

The rest of the market turned in a steady performance on what, in effect, was its first fully operational day of the new year.

It managed to accommodate a profit warning from the Redland building materials group and the anxiety of a late opening by a snowbound Wall Street.

After a hesitant opening, New York moved ahead, encouraged by hopes that the US budget stalemate will soon be resolved, followed shortly afterwards by another interest rate cut.

Redland slipped 7p to 381p, pulling RMC down 31p to 935p and Blue Circle Industries 10p to 337p. McBride, the detergent maker, continued its sad market career, slumping 37p to 148p on a disappointing trading statement. Whatman, the biology and environmental group, fell 40p to 385p on a profit warning but Lloyds Chemists, a long-time bid candidate, added 10p to 289p in response to a trading report.

Tate & Lyle, the sugar group, was hit by a profit downgrading by Credit Lyonnais Laing from pounds 331m to pounds 308m and from pounds 363m to pounds 348m. Even so, the securities house believes the shares - down 10p at 469p - are a buy.

Others lower included Acorn Computer, off 25p to 212p, on profit taking and Frost, the petrol retailer said to be suffering from squeezed margins in the battle of the forecourts. The shares reversed 19p to 173p.

Oils, however, gushed higher as the sudden outbreak of winter in the US hardened the crude price and one US fund was said to be switching into oils out of technology stocks. British Petroleum added 10p to 549.5p and Shell 11.5p to 877.5p. Enterprise Oil put on 10p to 394p. But insurances were uneasy at the prospect of a possible rush of US claims.

Courtaulds, the chemical group, gained 10p to 437p, apparently in belated response to an SBC Warburg buy recommendation last week.

Arjo Wiggins Appleton improved 8p to 189p allegedly on Cazenove support.

Utilities were mixed. Seeboard brightened just 5p to 532p as Whitehall cleared the pounds 1.6bn bid from the US group Central & South West; South Wales Electricity edged ahead 4p to 948p as Barclays de Zoete Wedd declared a 5.1 per cent stake under the market maker disclosure rules. Welsh Water, bidding for SWE, was little changed at 741p.

Zeneca dipped 12p to 1,253p, with ABN Amro Hoare Govett saying the shares were overvalued and without a bid, which it regards as unlikely.

Eurotunnel had another distressing session, sinking 5p to 83p on growing worries that Japanese banks will refuse to support the latest round of refinancing.

Allders, on the surprise arrival of LVMH, the French luxury goods group, with 2 per cent interest, jumped 14p to 184p. Rumours of a strike for the department store chain, which also has extensive duty free interests, have been circulating for some time.

Geest added 4p to 210p as its banana sale was approved, leaving the group looking ripe for a bid, and retailer Pet City's remarkable run continued with the shares 27p to 437p against the 300p flotation price.

Cobham, the expanding aerospace business which used to be known as the FR Group, advanced 13p to 495p. It met 15 institutions yesterday and is set to meet analysts tomorrow. The group acquired Westwind Air Bearings, a maker of spindles for machine tools, in November for pounds 75m.

Lonrho attracted support, up 7p at 191p, on speculation it will accompany Thursday's results with details, or at least indications, of the long suspected break up.

The group is rumoured to be planning to split its mining and some of its African operations into a separately quoted company. The hotels and other leisure interests would be retained with the garage businesses in this country and other odds and ends sold off.

TAKING STOCK

rFirth Holdings, the old GM Firth, hardened 2.5p to 40.5p, highest for five years. The gain reflected more share buying by SRI Inderajaya, a Malaysian investment group. It acquired 1 million shares (1.5 per cent) last week, lifting its interest to almost 8.5 per cent.

Sir Alan Thomas, the former arms procurement chief at the MoD, has revitalised Firth, a steel group, since moving in last year. The Malaysians, who have nearly doubled their stake since July, are not Firth's only fan - M&G recently lifted its stake from 8.9 per cent to 14.9 per cent.

rPolypipe, which should be benefiting from the recent big freeze, is attracting take over speculation again. The shares climbed 5p to 190p, a new 1995/96 peak.