Market Report: Analyst's report gives a lift to battered BAe

IS sentiment at last beginning to swing in favour of British Aerospace, the nation's biggest manufacturing group, which has suffered a succession of humiliating setbacks?

Yesterday the shares rose 7p to 147p, reflecting the US aircraft orders and some exceedingly bullish comments from the highly rated analyst Brian Newman at the stockbroker Henderson Crosthwaite.

BAe shares, riding above 650p last year, have been savaged as trading deteriorated, a rights issue flopped and the stock market braced itself for losses of more than pounds 1bn this year.

But the Newman team has picked BAe as its share for 1993. It sees the price doubling and profits recovering to around pounds 200m.

Hopes that the long-running pounds 2bn Al-Yamamah defence contract will soon be clinched, and the possibility of a string of property disposals, are among the prospects offering encouragement. Henderson is also impressed by the pounds 11.3bn order book and the dramatic revival at the Rover car group.

The US Airbus order and the decision to go ahead with a scaled-down version of the European fighter are further signs that the clouds are beginning to lift.

BAe, with an estimated 450p break-up value, is also, some suspect, negotiating an important manufacturing link, possibly with a German group.

Such a move, it is felt, would fit the philosophy of John Cahill, the former BTR chief who has been in command for seven months.

Rolls-Royce, hit lately by savage profit downgradings, also gathered height on the US order, climbing 5.5p to 109.5p.

The rest of the stock market was in more bullish form, with the FT-SE 100 index improving 14.9 points to 2,732.8. Even an indifferent New York display was blissfully ignored.

Among leaders higher were Allied-Lyons, BOC Group and Imperial Chemical Industries.

But once again it was the second division, as represented by the FT-SE 250 index, that led the advance. The index climbed 18.4 to 2,698.8, reaching its highest since it was introduced two months ago.

Oils were mixed but Lasmo stuck at 137p, with Societe Generale Strauss Turnbull, the arch-bears of British Petroleum, remaining negative, suggesting the shares should be sold down to 125p. SGST believes strongly that Lasmo should cut its final dividend. Even a halved final to 3.1p a share would not be covered by expected earnings.

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Takeover hopes returned to haunt Tarmac, the building group. Talk that BTR or Minorco may pounce pushed the shares up 6.5p to 106p. BTR advanced 13p to 529p. Pilkington, the glass maker, also enjoyed a late spurt, up 5p to 90p. Bid speculation was cited.

The Hammerson property group, Tuesday's hot takeover candidate, gave ground but continued to attract attention. The powerful ordinary shares eased 8p to 291p, but the low voting 'A' shares were down 12p to 265p.

Downgradings continued to take their toll. Queens Moat Houses fell a further 3p to 34p as other houses prepared to follow the Barclays de Zoete Wedd revision. United Biscuits eased 2p to 331p as County NatWest shaded its forecasts. But MB Caradon, the building products group, rose 10p to 265p as James Capel turned positive and RMC Group responded to a Cazenove upgrade with a 15p improvement to 542p.

General Electric Co reflected its investment presentation - at Credit Lyonnais Laing - with a 7p jump to 269p. Medeva, the drugs group, rose 3p to 209p as Nomura made positive noises.

The profit warning devastated MTM. The chemical group, 290p earlier this year, more than halved to 15p.

Argyll Group rose 2p to 389p. Panmure Gordon will host an institution investment meeting in Glasgow today.

Hillsdown Holdings, on the promise to hold the dividend, improved 8p to 130p. However profit downgradings are expected when the group meets analysts in the new year.

Tate & Lyle edged ahead a further 1.5p to 399p on the expectation of new contracts with Pepsi-Cola.

Harrisons & Crosfield put on 6.5p to 147.5p. It may merge its pvc operations with those of Akzo of Holland.

GKN continued to advance although Carr Kitcat & Aitken turned seller, largely because the US car market is not picking up as quickly as hoped. It expects profits of pounds 128m this year.

FKI, the mechanical engineer, edged ahead 1p to 102p as a 4 million line was placed, believed to have been by Panmure Gordon, at 105.5p.

Shares seemed to capture a little of the festive spirit yesterday. The FT-SE 100 index rose 14.9 points to 2,732.8 and the FT-SE 250 index 18.4 to 2,698.8. Turnover was strong at 676.3 million shares, with 22,716 bargains registered. Government stocks were modestly higher

Mirror Group Newspapers rose 3.5p to 89.5p, a two-day gain of 9.5p. Trading in the shares has often been brisk. Stories circulate that the receiver of the Maxwell group is on the verge of placing his controlling shareholding with institutional investors. A remarkable price of 125p, last year's flotation level, is suggested. But the story seems wide of the mark.

Ransomes, the lawnmower group, ran ahead 4p to 28p yesterday as bid speculation grew. But chief executive Robert Dodsworth blamed a stock shortage for the jump. The shares, down to 6p at one time this year, have come up from 18p since the start of the month. Ransome moved back into profits in the first half of the year and is seen by many as a recovery play.