Wall Street prompts a U-turn after a subdued start

MARKET REPORT
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The Independent Online
The Americans rescued the stock market. New York, after a four- day retreat, defied most forecasters by shrugging aside Pat Buchanan's New Hampshire victory and surging ahead.

During London trading the Dow Jones Average was up more than 40 points, prompting a remarkable U-turn.

In the early trading the FT-SE 100 index was down 25 points and seemed set for another subdued display. Gradually confidence returned. And once it become apparent Wall Street had recaptured some of its exuberance, blue chips perked up, lifting Footsie 11 points at the close.

It was one of the few occasions in recent months when a New York advance had much impact in London. Shares have tended to take much more notice of US weakness than strength. Hence Footsie has lagged forlornly behind the Dow since the record breaking surge started last year.

Until yesterday's performance, fears had grown that the American party had come to an end and New York shares were set for a sharp correction. Now the view is that the US bull market could still have some way to go.

Lower interest rate hopes, which resurfaced following weak retail sales, and Commercial Union's results, which kept alive hopes that the current profit season would not be too disconcerting, were other influences behind the market's strength. Another firm display by Government stocks also contributed.

Takeover activity was concentrated on insurances. GRE's figures on Tuesday and then the CU offering confirmed the industry was in positive shape and there is a strong argument that the sector is undervalued. So Royal Insurance, reporting today, gained 12p to 386p.

But the latest gains were not due entirely to trading considerations. The industry is set for a round of consolidation, a development currently exercising the minds of the big players. Rumours of Continental strikes are never far below the surface; there is also talk of outsiders, such as bankers, barging in. In such an atmosphere defensive marriages among UK insurers are thought to be likely.

CU rose 16p to 614p; Legal & General, often linked with National Westminster Bank, 8p to 726p and London & Manchester 12p to 392p. Among brokers, Sedgwick added 6p to 134p.

Lloyds Chemists edged ahead 2p to 491p as Barclays de Zoete Wedd and UBS mounted a dawn raid to acquire 9.9 per cent for bidder UniChem at 497p. The rival bidder, the German Gehe group, contented itself with lifting its bid to 500p.

House of Fraser, the department store chain, gained 11p to 188p (after 190p) as rumours of a bid or a key boardroom appointment circulated. David Dworkin, the US entrepreneur who masterminded the start of recovery at Storehouse, was said to be the boardroom addition. He left Storehouse three years ago with a pounds 2.7m pay-off.

Elsewhere Ladbroke added 2.5p to 186p in active trading, and two other takeover candidates, Royal Bank of Scotland and Standard Chartered, edged ahead.

Inchcape, off 4p at 242p, was ruffled by talk of a profit downgrading and dividend worries; Wagon Industrial produced the day's profit warning, falling 32p to 389p.

Abbey National slipped 7p to 592p as SBC Warburg placed 10 million shares at 590p.

A US investment presentation inspired Vodafone 6p higher to 227.5p, and National Power and PowerGen brightened on Merrill Lynch support.

Tesco encountered more downgradings but managed a 2p gain to 277p. ABN Amro Hoare Govett has lowered its 1997 forecast from pounds 725m to pounds 700m; Mees Pierson has gone from pounds 775 to pounds 735m.

Bank of Scotland shaded to 284p as Warburg moved from buy to hold after lowering its forecasts from pounds 526m to pounds 505m and pounds 550m to pounds 520m.

British Steel strengthened to 172p following an upbeat trading statement from a rival but Thorn EMI once again proved it was better to travel than to arrive, falling 28p to 1,623p following confirmation of its music- rental split.

With the gold price tumbling again, Mercury World Mining, with around 30 per cent of its assets in gold, fell 2p to 99.5p. Bakyrchik lost 16p to 485p.

Aegis, the media buyer, remained in demand, advancing 2.5p to 50.75p in busy trading. Flare, the ceramics group, progressed a further 11p to 161p.

Worries resurfaced about Frost, the garage group caught in the petrol price war. The shares fell 9p to 133p. Intercare, the health group, gained 2p to 64p.

TAKING STOCK

rShares of Brent Walker, the once high-flying leisure group, continue to limp along. They moved off their low, gaining 0.25p to 1.5p. Struggling under a pounds 1.4bn debt mountain, the group is near to floating the shares of its Pubmaster chain of around 2,000 pubs. Such a sale could produce pounds 150m. Its other main asset, the William Hill betting shops, will either be sold or could, under a restructuring, emerge as a separately quoted venture, with Brent Walker left with the properties. But such moves are unlikely to wipe out debt.

rFidelity Special Value Investment Trust has the backing of the stockbroker Killik. It draws attention to assets growth, 96p to 123.9p since the launch in November, 1994. The shares are 105p - "unjustified for such a rapidly growing fund", says Killik.

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