Utilities shrug off windfall fears to retain their glow

MARKET REPORT

Utilities, once seen as the big casualties of a potential Labour government, remain the stock market flavour of this election month.

As equities drifted, unsettled by Friday's New York slump, many of the old privatised groups turned in encouraging performances with leading investment houses continuing to point to their attractions.

The general view is that windfall tax worries have been exaggerated, the regulatory climate is unlikely to deteriorate and dividend growth should be assured.

The English generators, National Power and PowerGen, have been charged up since John Major's come-to-the-polls invitation. NP, 498.5p when the election was called, climbed 9.5p to 535p; PG rose 10.5p to 638.5p from 623.5p. Over the same period Footsie has lost more than 170 points.

NatWest Securities once again drew attention to NP; Morgan Stanley, the US investment house, was another extolling NP's virtues, saying the generator was well-positioned for growth.

The US group also took a shine to National Grid, up 5p at 222p. Energy, one of the former Hanson constituents, also found favour with Morgan, gaining 7.5p to 495.5p. It is in the running to buy the New England Electricity operation. Other utilities higher included Thames Water, up 2.5p at 677p, and ScottishPower, 4.5p at 381p.

Southern Electric, the last survivor of the 1990 regional electricity sell-off, rose 8.5p to 428.5p. Inevitably stories its days of independence will not last much longer are going the rounds. But it is just possible that if there is a change of government Southern will defy the odds and continue to go it alone.

BG had another strong session, gaining 4p to 185.5p, highest since it split from Centrica. The market is reading the delay in its confrontation with Ofgas as a sign it should enjoy a favourable outcome; there is also persistent, if unlikely, speculation of takeover interest with, as usual, unidentified overseas players said to be interested.

BT fell 3.5p to 438p. Shareholders meet today to approve the merger with MCI, the US group. The proposed deal has prompted Societe Generale Strauss Turnbull to produce some telephone number profits. For the year ended last month its is looking for pounds 3.15bn; this year the forecast is pounds 4.3bn and next year SocGen is shooting for pounds 5.75bn. The securities house believes the shares are a buy and points to the possibility that many UK institutions are likely to be "substantially underweight" once the merger is completed.

Footsie ended 19 points lower at 4,251.7. In early trading it was off 37.8. The interest rate cloud continues to hover threateningly with increases on both sides of the Atlantic regarded as foregone conclusions.

The decline was accentuated by dividend payments removing almost 7 points from the calculation. Shell fell 33.5p to 1,026p although going ex-dividend cost 28.13p.

General Electric Co firmed to 370p. The electronics giant is still trying to get involved in the Thomson-CSF sell-off in France and could be holding talks with the Lockheed Martin group.

Health shares had a downbeat session. Shield Diagnostic, despite another impressive statement, fell 30p to 607.5p. Erik Hornnaess, with Abbott Diagnostics, has become a director and new stockbroker UBS is hosting institutional meetings this week. Celltech lost 10p to 560. SkyePharma, reflecting investment presentations, rose 8p to 83p and ML Laboratories' long decline was arrested with a 15p gain to 192.5p.

Zeneca fell 17p to 1,834p with ABN Amro Hoare Govett adopting a negative stance; the same securities house also hit Next, the fashion retailer. Its sell advice lowered the shares 10p to 621.5p.

JN Nichols, the Vimto soft drink group, fizzed another 9p higher to 206.5p. The shares have risen 20p in three trading days.

Raine, the building group, moved ahead another 1.5p to 19p. Trading was again active with Seaq putting volume at 4.6 million shares. The gossip, which has lifted the shares 2.75p in two trading sessions, ranges from a hostile bid to a big disposal.

The Bardon merger with rival Camas was welcomed with Bardon up 3p at 434.5p and Camas 9.5p higher at 93.5p.

Queensborough, the leisure group, shaded to 33p. There are worries its expansion plans will force a rights issue. But such talk seems wide of the mark. Stockbroker Collins Stewart expects profits this year to move to pounds 4.2m from pounds 3.22m.

Taking Stock

Jarvis, the building and railway maintenance group, jumped 15.5p to 240p; the shares were 4.75p two years ago. Latest excitement stemmed from Jarvis reporting profits would top market hopes. Its stockbroker, Peel Hunt, promptly lifted its estimates. For the period to the end of last month it went from pounds 10.1m to pounds 14.6m and this year from pounds 21m to pounds 27m.

Results should be announced in June; there could be an acquisition before then.

Stories resurfaced Nigel Wray plans to pump Nottingham Forest into one of his quoted vehicles - Carlisle or printer Thomas Potts. Carlisle, a property shell, held at 10.5p; Potts eased to 13.25p. The market believes Potts has a deal lined up which will involve a placing. But it is not convinced it will shoot for Forest.