Market Report: Chills on Wall Street turn London cold

Trans-Atlantic influences added to the agony of a demoralised stock market yesterday.

As shares wilted in the face of the deepening recession and the Government's apparent reluctance to cut interest rates, gloomy trading reports from two US giants caused dismay.

IBM, the computer group, unsettled New York with a grim statement and then a 10 per cent profit shortfall at Philip Morris, the beer, food and tobacco group, undermined some of the market's lingering takeover hopes and caused dismay to followers of BAT Industries, the insurances and tobacco giant.

The FT-SE 100 share index, at one time down 38.1 points, ended 28.1 lower at 2,546.6. Falls were spread throughout the market, as illustrated by a 27.1 fall to 2,373.9 by the new FT-SE 250 index. Not one sector managed a gain. Composite insurance and hotels were the main casualties.

BAT was at one time down 40p. It closed at 823p, off 19p. Rothmans International lost 8p to 585p.

The fact that food was the main factor behind the Philip Morris setback was largely ignored. BAT, which has a big US tobacco exposure, was already feeling the pinch from a sombre insurance review and the Philip Morris tidings created unease. Trading was brisk.

Philip Morris also heaped pressure on food shares, particularly those with US interests. Cadbury Schweppes and United Biscuits, viewed as possible Philip Morris bid candidates, fell. Cadbury lost 10p to 429p and United 6p to 312p.

There was also discomfort for Cadbury from the latest Coca- Cola figures. Although showing impressive progress, some analysts took the view that they indicated tougher times for Coke in the UK and Europe. Cadbury has 51 per cent of the UK Coca- Cola operation.

Reuters, more indirectly, also suffered from the American whip. It has held investment roadshows in Chicago, demonstrating its Globex trading system. Some UK analysts were not too impressed. The shares dropped 29p to 1,225p.

Barclays and National Westminster felt the impact of the Moody's credit watch. NatWest fell 12p to 339p. Barclays, which also had to contend with cautious noises from James Capel and SG Warburg, declined 17p to 338p.

Elsewhere Ladbroke Group gave further ground, 6p to 143p, on the Kleinwort Benson comments. Dismay over the Forte boardroom changes took 9p from the shares at 141p.

BICC, the cables and construction group, was hit as Smith New Court placed 5 million shares at 218p, leaving the price 19p down at 219p. Vickers encountered Societe Generale Strauss Turnbull sell advice and retreated 11p to 71p.

Engineer IMI dipped 3p to 221p. Panmure Gordon has downgraded from pounds 74m to pounds 68m and there was talk of a forecast of pounds 64m being released today. Last month there were hopes IMI would top pounds 80m.

Pilkington, where more redundancies are expected, was heavily traded with some large lines said to be on offer. The shares fell 2p to 83p.

There were, however, some gains. Grand Metropolitan ignored its US food involvement and edged forward 5p to 382p on a County NatWest buy recommendation. SmithKline Beecham rose 4.5p to 517p as some institutions switched from Wellcome, down 18p at 931p.

Thames TV, which loses its ITV contract at the end of the year, ignored the gloom, up 13p to 181p. The shares have risen 44p this week. Talk of a bid from Thorn EMI, which has 58.85 per cent, is dismissed by sources close to the group.

The sharp advance is put down to Thames' growing advertising revenue, the improved performance of its US operations and the value of its film library. There is also talk it may increase its stake in the planned Channel 5 and will wring a price near to pounds 20m for its television film rights from Carlton Communications.

Water shares edged ahead on the Ofwat increases.

Medeva, despite a presentation in Paris, was another drug share under the weather, falling 13p to 180p.

Favourable comment from several houses failed to prevent the Dalgety food group joining the slide, down 4p to 422p. Packaging group David S Smith dropped 8p to 272p although an analysts' visit to its French operations was regarded as positive.

Arjo Wiggins Appleton and MFI Furniture were among the shares overshadowed by downgradings.

Pentland lost 10p to 132p following its decision not to pursue the takeover of Adidas, the sportswear group.

The FT-SE 100 share index retreated 28.1 points to 2,546.6 yesterday. At one time it was down 38.1. The FT-30 index was 27.7 lower at 1,850.2. Trading was again moderate at 476.8 million shares with 21,116 bargains. Government stocks were squeezed ahead by up to half a point

The share offer from Trinity Holdings, makers of Dennis dust carts and fire engines, received a warm reception. Stockbroker Albert E Sharp placed 18.6 million shares with institutions. The 6.25 million offered at 120p to intermediaries was subscribed 2.29 times and has been scaled down. Dealings are due to start on Monday. Trinity was a buyout from Hestair.

Hollas, the textile group, bumps along at 12.5p. The market has become impatient waiting for the long-signalled deal involving its Hawkshead Sportswear off- shoot. There are now indications Hollas is near to agreeing a joint venture arrangement with a prominent mail order group. With loss-making Hawkshead sorted out, Hollas shares could be due for a re-rating.