Market Report: Footsie refuses to oblige the bears with a meltdown

For the second Monday in succession the so-confidently predicted stock market meltdown failed to materialise. True, Footsie was off 86.5 points in early trading. And it suffered a downbeat session - at the close the index was off 30.8 at 4,835, a poor but hardly disastrous display.

Sellers were conspicuous by their absence; so were buyers. Trading was low even by the undemanding standards of the holiday season. Indeed turnover would have looked particularly woeful if special deals had not gone through.

What appeared to be a dividend-washing exercise at BT contributed 34.5 million to volume and more Thorn `B' share buy-backs accounted for another 68.6 million. So real turnover was for the first time for a long while below the important 500 million level.

The spectre of another crash, as the tenth anniversary of the 1987 disaster approaches, is haunting the market. It is a superstitious place. And uncomfortable anniversaries invariably produce acute attacks of the jitters.

Even so Friday's slump was surprising. It occurred without a realistic excuse. Many fund managers and strategists were quick to reiterate their view that blue chips were hopelessly overvalued and a dramatic correction was on the way.

There is no doubt that blue chips, after their heady progress this year, are fragile and it does not take much to erode confidence. But yesterday's performance will be seen by the more bullish observers as an encouraging response to Friday's retreat.

Still, the immediate Footsie outlook is dominated by New York. If, as expected, US interest rates remain unchanged today the general view, which is so often wrong, is that the US market will turn on another spectacular display.

The well-flagged recovery by supporting shares was halted, only temporarily in the eyes of many. The FTSE 250 index gave up 34.6 points and the FTSE Smallcap 14.8.

Bass, up 11.5p to 839p, and Ladbroke, 3.5p to 253.5p, were spurred by the bookies' legal victory against Camelot over the 49s fixed-odds numbers game. Camelot will appeal against the decision of magistrate Ronald Bartle.

The brewing giant also gained strength from renewed stories that it is thinking of pouncing on First Leisure Corporation, the discotheque to health and fitness group. The market is convinced Bass, blocked by the Government from buying the Carlsberg Tetley brewing operation, needs at least one big deal to recapture its momentum.

There is a strong body of opinion that it will descend on William Hill, the betting chain representing the last significant asset of the tottering Brent Walker (unchanged at 1.5p). Talk of a hotel swoop is also in the air.

However FLC, headed by ex-Channel Four chief Michael Grade, could make an attractive buy for the sprawling brewer. It already operates in some FLC areas such as bingo and bowling alleys and could see the group's other interests as offering a natural diversification. FLC shares rose 11.5p to 322.5p. They were, before disappointing trading eroded sentiment, around 400p last year. Any Bass bid, it is thought, would be pitched near the 400p level.

BTR, still largely on US buying, continued its revival, again topping the blue chip leader board with a 6p gain to 221p. National Power, up 11p to 518.5p, was pushed on yield considerations.

Banks, which led this year's Footsie charge, were generally lower with HSBC, hit by SBC Warburg, the main casualty. The securities house moved from add to hold, cutting the recently high-flying shares by 70.5p to 2,097p.

Sears, the unhappy retailer, added 2.5p to 62p, against turn-of-the year suggestions the shares were worth 120p. PDFM, the market's most entrenched bears, went bargain-hunting, lifting its stake by 4.4 per cent to 20.5 per cent. Storehouse's rally continued with a 7p gain to 228.5p.

Safeway's latest price-cutting campaign left the supermarket chain off 7.5p to 379p. Dixons added 8p to 609.5p with stockbroker Sutherlands pointing to a 670p target price.

A cross below the then market price clipped Kenwood, the domestic appliance group, which seems to have resisted the overtures of smaller rival Pifco, 14p to 103.5p, a low.

RJB Mining, on its mine closure and Dresdner Kleinwort Benson sell advice, fell 5p to 312.5p.

Talk of a bid for struggling Irish oil group Bula Resources had little impact, leaving the shares off 0.25p to 1.25p. Dawn Til Dusk, a convenience stores chain, jumped 40p to 255p.