Praise pushes Barclays and NatWest to new highs

MARKET REPORT

An upbeat performance by Barclays and National Westminster Bank helped the stock market recover from an indifferent opening. The banking display was prompted by thoughts of share buy-backs and cheerful comments with next month's figures.

Salomon Brothers, the US securities house, is keen on both shares and believes the two banks will indulge in buy-in action. Barclays led blue chips with a 28.5p gain to a 1,056.5p peak and NatWest, almost showered with analytical praise lately, rose 15.5p to 741p, also a new high.

Salomon believes Barclays should produce profits around pounds 2.3bn (pounds 2bn) but feels increased provisions and higher technology costs could cut NatWest profits to pounds 1.1bn although progress will resume this year.

The banking excitement swamped vague talk Barclays could bid for Norwich Union, one of the mutual societies planning to convert into a plc this year. In early trading the shares were down 12p before the buy-back story captured the market's imagination.

Cable & Wireless was another in the spotlight. As Hong Kong's last days as a colony melt away, the position of Cable's 58 per cent interest in Hong Kong Telecom has to be resolved.

Most believe Cable's new chief executive, Dick Brown, is near to completing a deal which will sharply reduce the HKT stake and allow Cable to play a major part in the development of the Chinese communications industry. The shares rose 7.5p to 482.5p.

In early trade Footsie was down 37 points. Then a rally set in and when New York displayed renewed confidence blue chips almost managed to eliminate their falls, with Footsie ending just 0.5 points lower at 4,087.

Oils were firm with much of the action down among the second liners. British Borneo Petroleum Syndicate gushed 72.5p to 1,010.5p, reflecting takeover hopes and much higher estimates of the reserves of one of its Gulf of Mexico fields. Cairn Energy, on Bangladesh development hopes as well as bid talk, added 25p to 468.5p. Premier Oil was also pulled into the speculative cauldron, gaining 2.5p to 39.25p. Aviva Petroleum, following a confident report on its Colombian operations, rose 8p to 41.5p.

But Burmah Castrol was one to miss the fun. A profits downgrading by HSBC James Capel lowered the price 22.5p to 1,086.5p. Capel cut last year's expectation from pounds 168m to pounds 145m and next from pounds 172m to pounds 156m.

Sears, which duly produced a dismal trading statement, lost 4p to 87.5p.

Profit warnings hit computer group Staffware, off 56p to 197.5p, and metal basher Rubicon, 55p to 112.5p.

Zeneca, after early falls, ended 6.5p higher at 1,637.5p. Estimates about the damage the strong pound is doing seem to have been overdone. It now appears a 6 per cent downgrade is nearer the mark rather than the 11 per cent suggested on Wednesday.

Imperial Chemical Industries fell 14p to 751p as Capel lowered its profit forecasts by pounds 100m to pounds 650m and by the same amount to pounds 800m. Other chemical shares felt the strain.

Ladbroke shaded 2p to 230p with ABN Amro Hoare Govett moving its stance from buy to hold but Hambros Countryside put on 7p to 111p as SBC Warburg banked on the shares on the back of the recovery in the residential property market.

Publishers were in demand, reflecting a sharp fall in newsprint prices. Daily Mail and General Trust gained 57.5p to 1,535p and Mirror Group 4p to 226.5p. Reuters remained weak on competition worries, off 13p to 706.5p.

Matthew Clark rose 18.6p to 277.5p as bid hopes were revived; figures are due next week. Courtaulds Textiles, a trading statement expected today, firmed to 227.5p.

GB Railways, the most popular share among Sharelink clients in the past week, eased 5p to 247.5p.

Fenchurch, the insurance broker, rose 6p to 58p on bid hopes; shares were 152p a year ago. Lamont, a textile group where vague takeover hopes stirred recently, fell 6p to 180p as a market maker appeared to sell 320,000 shares at 175p.

Superframe, making photographic frames and shelving units, gained 2p to 18p; Dean Corporation, a building and property group, has taken control of a 25.8 per cent stake at 20p.

Quadramatic, making coin handling equipment, held at 247.5p; Gartland Whalley and Barker, a corporate developer, placed 4.5 million shares through Charterhouse Tilney with institutions at 246p.

Taking Stock

Colefax & Fowler should be a beneficiary of the revival in the residential housing market.The upmarket fabric and furnishing group seems destined for a trading uplift. Around pounds 2.2m is expected this year. At 115p the shares have been overlooked.

Emerald Energy's Colombian adventure was given a boost when Seven Seas Petroleum, a Canadian group, announced a "prolific" find 20 miles from where Emerald, unchanged at 4.25p, is due to explore. The Seven Seas field, which may contain more than one billion barrels of oil, was discovered and largely developed by Keith Hewitt, who is leading the Emerald search.

Japanese investment trusts are suffering in the wake of the Tokyo share slide. Fleming Japan fell 7p to 182p; it was 289p in May.