Market Report: Blue chips under pressure in spite of green shoots

THE stock market was in nervous mood yesterday despite growing evidence of economic recovery in Britain.

Higher mortgage lending and better-than-expected retail sales last month failed to impress share investors. They were more concerned by Wall Street, which saw a sharp overnight decline.

The fall unsettled the market and the mood turned even more bearish after heavy futures activity by one prominent US-based investor. As a result, blue chips came under early pressure and were in steady retreat for much of the day. By mid-afternoon, the FT-SE 100 index, measuring the top 100 shares, had fallen by 37.7 points.

A steadier opening by Wall Street failed to turn around the market. There was a brief attempt at a share rally, but it soon petered out, with the Footsie closing near the day's low at 2,843.8, down 37.3.

'The futures boys have had the upper hand all day. They've been looking to smash the market all week and yesterday got away with it,' one trader said.

However, United Biscuits, the food manufacturer, was in demand. The company has been the subject of persistent takeover talk, which suddenly resurfaced late in the afternoon. Hanson, the industrial conglomerate, is regarded as the most likely bidder and is thought to be lining up a knockout blow at 650p a share.

United Biscuits closed 14p higher to 399p but trading volume in the stock was a modest 2.7 million. Hanson, which saw heavy trading earlier in the week, fell 3.5p to 338p. A total 8.7 million shares changed hands.

Shares in Allied-Lyons, the brewing and food group, rose 5p to 580p. The company is also regarded as a potential target for Hanson. However, the group was one of several brewers in the limelight.

The sector has underperformed the market this year, but is attracting buyers. Societe Generale Strauss Turnbull is believed to be recommending the sector as undervalued. Whitbread 'A' frothed up 9p to 471p. However, Bass slipped 6p to 548p.

A strengthening sterling led to a ragged retreat among oil shares. Signs of further US selling pushed British Petroleum 10.5p lower to 289.5p. NatWest Securities yesterday issued an investment circular reiterating its long-term recommendation on the company.

Analyst Fergus Macleod says that BP's earnings recovery could extend beyond the targets set last summer.

Shell, the oil giant, dropped 14p to 466p. Lasmo, the debt-laden North Sea explorer, shed 3p to 147p while Enterprise was 7p off at 487p. British Gas gave up 1.5p to 311p. But Hardy Oil jumped 4p to 154p.

House builders and building materials stocks were in strong demand yesterday.

They were boosted by a further rise in mortgage lending by building societies last month. Wimpey raced ahead 10p to 182p. Goldman Sachs, the big US investment firm, says the shares are a buy.

Countryside Properties added 6p to 136p while Bryant gained 7p to 148p. Wilson Bowden rose 11p to 461p. Amec was 3p higher at 96p.

Alexon, the clothing retailer, saw another sharp jump following a management shake-up earlier this week. The shares extended gains with another 14p advance to 103p.

Other retailing stocks were also in the limelight thanks to higher consumer spending in the high street.

Dixons, the electricals chain, increased 3p to 221p while Etam, the ladies fashion group, perked up 5p to 233p.

Asda, the ailing supermarket group, lifted 2p to 71.5p despite 1,300 job cuts announced yesterday. The company said that it was closing down Lofthouse, its bacon and sausage manufacturing business. J Sainsbury shed 2p to 476p despite a further recommendation by Smith New Court, the broker, yesterday.

Ratners, the troubled jewellery group, was in demand, advancing 2p to 18.5p. The shares have been attracting strong private interest.

Bowater, the packaging group, reurned to the acquisition trail with a dollars 100m US purchase. The shares closed at 506p, up 8p. Arjo Wiggins, the Anglo-French paper giant, rose 4p to 192p.

Pearson, the publishing and banking group, was 10p better at 420p. The company has clinched an agreed takeover from Thames Television, for pounds 99m. But Reuters, the financial information group, gave up some of its recent gains. They were 23p lower at 1284p.

Among electronics stocks, Gresham Telecomputing was unchanged at 180p after the company confirmed that it was in talks with several potential buyers for its new products. Cray Electronics, the software group, nudged 1.5p higher to 146.5p. They have come up from about 135p this week.

Despite encouraging news on the economy, shares in blue chips were in ragged retreat due to heavy selling on the futures market. The FT- SE 100 index fell 37.3p to 2843.5, while second liners were firm. The account ends on 7 May and settlement is on 17 May.

Shares in Whessoe, the North-east-based measuring instruments maker, jumped nearly 5 per cent yesterday from 337p to 352p. Neither traders nor the company could account for the excitement other than to suggest it was a late but positive reaction to Whessoe's purchase of Autronica, a Norwegian electronics outfit. Whessoe held a rights in February at 260p to raise pounds 14m to part-pay for Autronica.

Watch shares in Crestacare, the nursing homes group. Carr Kitcat & Aitken has just published a circular that predicts that the company is likely to be rerated soon. Crestacare's taxable profits are expected to emerge at pounds 3m this year, rising to pounds 3.6m in 1994, rating the shares on 11.6 times prospective earnings. The shares, unchanged at 40p yesterday, are trading at a substantial discount to the sector.

(Graph omitted)