Footsie singed to 11-month low by midsummer heat: Market Report

SHARES plunged to their lowest since July in what many described as a 'midsummer meltdown'.

All the worries that are haunting shares contributed to the decline, which left the FT-SE 100 index nursing a 65.8-point fall at 2,876.6.

The market, Datastream calculated, has lost pounds 138.4bn since the index reached its 3,520.3 peak in February. Yesterday's fall was pounds 15.5bn.

Trading was, however, again thin as market makers took defensive action to deter sellers. But the fact that such a staggering decline occurred in very low turnover is of little consolation to investors.

Once again the troubled dollar provoked the crisis. International support failed dismally to have any lasting impact, causing dismay in New York.

With New York expected to be under pressure and then confirming London's worst fears when it opened, shares were at the mercy of the futures market.

Even a relatively firm performance by government stocks failed to have a steadying influence.

With market makers prepared to exaggerate the market's despair, it was ripe for its now traditional torture from such fears as higher inflation and interest rates.

The dollar's display could well force the US authorities into a desperate interest rate increase in an attempt to shore the once almighty currency.

But there is talk of pressure for lower, or at least unchanged, European rates.

The rapid decline has chopped Footsie by almost 150 points this week. The supporting FT-SE 250 index has also been under intense pressure, falling 152.9.

Throughout the week trading has been remarkably thin, with the market bowing to futures and gilts and the inevitable marking down.

A difficult opening half of the year was predicted in many quarters. And, although many strategists have pulled back their year- end Footsie forecasts, most still expect a strong second half with the market ending higher than its 3,418 opening.

But fears that the market is on its way to 2,500 are beginning to look uncomfortably accurate.

Wellcome, the drugs group, was the solitary Footsie constituent to survive yesterday's crash. The shares gained 12p to 598p on suggestions that US investors had doubled their shareholdings to about 7 per cent, anticipating a takeover strike.

The group is, in effect, still controlled by the Wellcome Trust with 39.7 per cent of the capital. But New York believes the trust would be a willing seller if a takeover bid materialised.

HSBC, the banking group, fell 15p to 674p with a Smith New Court downgrading adding to its discomfort. The securities house, which lowered its Lloyds Bank forecast earlier in the week, was prompted to take the axe to HSBC because of currency moves and a suspected fall in dealing profits.

ShareLink, the execution-only stockbroker, also felt the dealing pinch. With worries about its expansion ambitions also taking their toll the shares tumbled 42p to 257p. Smith New Court fell 14p to 365p.

Grand Metropolitan, down 14p to 376p, attracted another downgrading, from James Capel. The group, which has sold some of its wine interests, is showing analysts its US food operations next week.

Ladbroke retreated 3p to 156p. Besides raising pounds 36.75m from a property sale to Prudential, it held a Texas do-it-yourself presentation for analysts.

Cadbury Schweppes, off 11.5p to 412.5p, encountered a NatWest Securities downgrading. Unigate, expected to sell its 33 per cent interest in Nutricia, the Dutch food group, held at 366p. Its suspected target, Hazlewood Foods, rose 4p to 129p.

Newspaper shares were again in the doldrums, but finished above their worst. The Telegraph, at one time down to 309p, ended at 332p, down 17p.

Mirror Group Newspapers fell 4p to 130p and United Newspapers 25p to 485p. Daily Mail & General Trust 'A' shares lost 33p to 870p.

Guinness dipped 7p to 441p. Financier Bernard Arnault said in Paris that he did not intend to sell any of his holding while the shares remained at their present depressed level.

As part of the Guinness-LVMH reshaping he has said he intends to sell 4 per cent by next summer. He also indicated he could eventually reduce his remaining 20 per cent interest.

Euro Disney's volatile display continued with a brief suspension in Paris doing little to calm nerves. The shares closed at 135p, down 18p, and the rights crashed 42p to 58p. Forte, off 3p at 224p, denied trade talk that it planned to sell its Lillywhites sports store in Piccadilly, London.

Merrydown, the cider group where profits are under pressure, fell 11p to 113p, a new low.

Another day, another fall. The FT-SE 100 index lost 65.8 points to 2,876.6 and the FT-SE 250 index 62.7 to 3,374.2. Turnover was 450.2 million shares with 21,804 bargains. The account ends on Friday with settlement on 11 July.

Cairn Energy held at 80p. The group, which is raising pounds 15m by reducing its interest in its US associate to about 27 per cent, is expected to produce profits of pounds 2.9m this year by Societe Generale Strauss Turnbull. It looks for pounds 5.1m next year and pounds 5.8m in the following year. SGST, which points out the shares are at a 20 per cent discount to assets, regards them as a buy.

Asda will next week offer the latest evidence of the damage being done in the supermarket price wars. It is due to report year's figures on Thursday. The market expects about pounds 190m, up from pounds 140.4m. The shares have been weak with the rest of the food retailers. They fell 2.25p to 52.5p. Since the Archie Norman-inspired revival they have been as high as 77.5p.