Market Report: Insurers lead the financial retreat

FINANCIAL STOCKS saw red yesterday as investors cashed in on the recent good run. After heady weeks dominated by the talk of a blockbuster merger between Halifax and Prudential and of the sale of Guardian Royal Exchange, dealers decided to take a breather and lock in some profits.

The insurers led the retreat. Legal & General was the biggest casualty, shedding more than 4 per cent to 725p, the third biggest faller in the Footsie. Royal & Sun Alliance was another 4 per cent loser, closing at 496.5p. CGU was down 40.5p to 989.5p, after it did not beware of Greeks bearing gifts and bought Royal & Sun's Athenian insurance operations for pounds 3.6m.

The Pru, still longing for a Halifax marriage, fell 26p to 876p.

The banks were not to be outdone by their insurance cousins. Abbey National, down 31p to 1,286p and Lloyds TSB, 20.5p lower at 854.5p, bore the brunt of profit taking.

Alliance & Leicester followed the trend and fell 8p to 912p,

The survivors were few and far between. Royal Bank of Scotland put on more than 3 per cent to 935p as broker Credit Lyonnais said "buy" and set a short-term target of 1,000p. Two of the classic low-liquidity, big price-swings financials were also in profit. Schroders was the second biggest riser in the blue-chip index, posting a 63p gain to 1,258p, while Sun Life & Provincial put on 9p to 532p.

The profit-taking that hit the money stocks was also behind Footsie's fall. An opening loss on Wall Street and sluggish trading after the upward spurt at the beginning of the week did the rest. The main index ended 43 easier at 5,755.3 - ignoring news of the United Kingdom's largest ever trade deficit - after spending most of the day in negative territory.

The medium cap had a dull day ending 2.5 better off at 4926.4, after swinging in a minuscule 9-point arc. The small cap finished 2.5 lower at 2,062.2.

The Footsie losers included 3i, down 4.4 per cent after BT Alex. Brown downgraded its recommendation ahead of today's results. BT was 34.5p lower to 828p after Brussels confirmed that it would launch a in-depth anti- trust probe into its tie-up with AT &T. Among the winners, Billiton, the mining giant, dug up a 4p gain after a huge buy order believed to be the tail-end of a tax-related deal.

Hotels booked in a good performance. Granada, the Travelodge-to-television group, was the instigator. A set of better-than-expected interims, the pledge of double-digit profit growth over the next three years and a solid hotels showing propelled the shares 4.3 per cent higher to 910p. Ladbroke, the bookmaker which owns Hilton hotels, built on the rival's gains and raced up the Footsie's leader board with a near 9 per cent gain to 246.5p. Ladbroke's jump was aided by whispers that one big institution had ended a selling spree which had depressed the price recently. Thistle, up 5p to 135p, and Stakis, up 3.5p to 105p, completed the sector's poker.

Among the undercards, Tate & Lyle, up 29p to 402p, sweetened analysts with a set of better-than-expected results. Johnson Matthey, the precious metals group, which rose 3.4 per cent to 392.5p after hinting at a spin off of its electronic division.

Bids, real and mooted, provided the rest of the excitement. Siebe and BTR continued to suffer hostile reaction to their pounds 9.4bn merger. Siebe headed the blue-chip losers' chart, shedding 6.3 per cent to 220p in active trade. BTR was also heavily traded and finished 3p lower at 126p.

The electronics group Astec surged an electrifying 118 per cent to 84p, following news of a pounds 265m bid from Emerson electric, its long-time suitor. WS Atkins, the consulting engineer, continued its recent plunge with a 10 per cent collapse to 495p, as the market fretted about the wisdom of its bid for Bovis, the construction arm of P&0.

Among the more speculative bid plays, Marley, the building materials group, rose 9.6 per cent to 85.5p as a mystery predator was said to be circling it. Weir, the engineer, rose 3 per cent to 225.5p, on persistent talk of a 300p-a-share bid.

Profit warnings and bearish statements claimed some victims. National Power suffered a 22p black-out to 538p after baffling analysts with the decision to sell its best power station and expressing caution on the earnings outlook.

CML Microsystems shed 33.4 per cent to 83.5p after warning that depressed semiconductor prices would slash profits. Hi-Tech, the sport shoe-maker, slipped 28 per cent to 18p after predicting a first-half loss. Banner Chemicals, down 21.7 per cent to 9p was also victim of a cautious statement.

Oils were depressed by the uncertainty over the size of the production cuts to be sanctioned by Opec. Premier lost 6.5 per cent to 21.75p, British Borneo shed 9.5p to 169p, while Enterprise Oil fell 10p to 349p.

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INFOBANK AND Vocalis, two small companies providing Internet services, had a field day. Infobank soared 20 per cent to 43.5p after raising pounds 8.9m through a placing and open offer. The money will be used to market its software for electronic commerce. Vocalis put on 17 per cent to 54.5p after announcing talks with internet provider UUNet to trial a product that allows use of the Internet through telephone voice commands.

WATERFALL HOLDINGS, the snoooker and bowling halls operator, rose almost 11 per cent to 66p on the back of renewed bid rumours. Dealers are whispering of an imminent 85p-per-share bid. However, European Leisure which sparked similar speculation earlier this year when it increased its stake to 25 per cent, is not believed to be the stalker. Allied Leisure, another big bowling outfit, is now the market's hot tip.