Market Report: Cautious Christmas cheer for retailers

HOPES OF a late festive buying spree, plus the feeling that many retailers and other Christmas-sensitive shares were over-sold, produced a string of modest gains as the rest of the stock market paused for breath.

Marks & Spencer led the revival with an 11.75p gain to 408.5p. EMI, with the Spice Girls again a Christmas hit, spun 10.75p higher to 400.75p.

However the two Footsie constituents have suffered humiliating falls from grace. Marks, mauled lately by a series of profit downgradings, was 619p earlier this year, and EMI, where trading has been far from ebullient, touched 607p.

The cautious Christmas cheer spread to Boots, up 13p to 1,040p; JJB Sports, 16p to 222.5p, and Next, 13p to 476p.

Even Flying Flowers, down from nearly 600p after a surprise summer profit warning, managed to blossom following tidings of good cheer. The mail order and marketing group said festive flower sales were higher than last year and its other core businesses were performing in line with expectations. The shares rose 17p to 187.5p.

Dixons, which returned to Footsie this week, went to yet another peak, gaining 29.5p to 821.5p although SG Securities made cautious noises suggesting the shares had run ahead of the game; it put "fair value" at 770p. The electrical group has, in the eyes of many, taken on a new image - offering a chance to play on the Internet.

But Kingfisher, which like Dixons has resisted the retail gloom, eased 3.5p to 637.5p as the long-time bulls Henderson Crosthwaite adopted a more cautious stance.

Footsie, after Monday's surge, fell 33.2 points to 5,843.3, ruffled by Tokyo's retreat. But there is a conviction that blue chips will again enjoy a Christmas romp and the setback was due to buyers holding off, hoping to skim some of the froth from the market.

Supporting shares were dragged up on the coat tails of Monday's exuberance, with the mid cap index 20.4 points higher at 4,763.3 and the small cap 9.1 at 2,031.6.

Many fund managers expect blue chips to make further progress next year. David Rough at Legal & General is looking for 6,300 at the year-end but warns that trading conditions could be volatile, with Footsie probably moving between 6,500 and 5,200. He believes base rates will fall to 5 per cent.

Ladbroke, the betting and hotel group, led the Footsie leader board with a 13p gain to 238p following the pounds 390m sale of its Coral betting shops chain to Deutsche Bank.

Colt Telecom moved ahead 37.5p, hitting another peak of 956.5p. The fledgling, still loss-making telephony group seems set to achieve the distinction of being the best performing share of the year - a highly unusual accolade for a Footsie constituent.

British Petroleum fell 12p to 878.5p despite transatlantic rumours that the merger with Amoco could be cleared today by the US authorities.

Diageo, the spirits giant, had an active session, ending 1.5p (after 16p) lower at 693p. Once again stories flowed that LVMH, the French luxury goods group, planned to sell all, or some, of its 10.84 per cent stake, worth some pounds 2.5bn. But the French group this time round issued a denial. It said: "Even if this stake is not strategic in the long term ... LVMH has no intention of selling it immediately."

The belief is that LVMH will want to cash in to buy the Sanofi beauty products activities, although debt finance could plug any short term gap.

General Electric Co lost 18.5p to 537.5p after causing yet more turbulence in the seemingly endless round of European defence alliance discussions by saying it intends to break itself into two - splitting its civil businesses from its aerospace and defence activities.

British Aerospace slipped 4p to 527p. It had been seen as a possible GEC partner although it has held long running talks with the German DaimlerChrysler group. The GEC action could encourage US groups to join in what could then emerge as a global defence consolidation programme.

Sears, rejecting the latest Philip Green embrace, was little changed at 262p.

Avon Rubber bounced 17.5p to 555p after rebuffing an approach last week and said was not in talks; Hiscox, a Lloyd's underwriter, rose 22.5p to 170p as the US group Chubb acquired 27 per cent at 225p. The brick-maker Ibstock, after CRH's teatime raid, gained 12p to 69p.

Profit warnings continued to appear. Haynes Publishing fell 17.5p to 185p and Jacobs did its chance of taking over Nightfreight no good at all by cautioning that profits would be below market estimates at around pounds 8.25m. The shares fell 6.5p to 52p. A cautious trading statement from English China Clays clipped 3p from the shares at 159p.

Informa, the result of the merger between LLP, the Lloyd's List publisher, and IBC, traded at 258p after touching 294p.

The auctioneer Sotheby's, a narrow and volatile market, jumped 285p to 1,440p, a peak. It appeared that only 500 shares were traded at 1,175p.

SEAQ VOLUME: 750.6 million

SEAQ TRADES: 51,535

GILTS INDEX: 114.95 -0.37

AVAILEON, which is emerging as an upmarket contract caterer, has won a five-year extension to its Elstree film studios contract and a new 12-year contract at the Royal Pump Rooms, Leamington Spa.

Another major contract is expected to be awarded next month. But winning the new business is expected to hit results for the year to end March; there was a pounds 442,000 loss last year. The shares held at 2.5p.

CARLISLE, the new Michael Ashcroft vehicle, held at 19p after, as expected, unloading its property interests. The pounds 14.5m realised will go towards developing its support services, which currently include contract cleaning, staff recruitment and security services.

With a capitalisation of pounds 210m Carlisle, expected to adopt an acquisitive policy, is the biggest company on AIM. Mr Ashcroft formerly ran ADT and is treasurer of the Tory Party.