Market Report: Stocks refuse to be stampeded by the bears

EQUITIES DEFIED the pessimists. Although the bears were out in force, shares managed to hold their own with the FTSE 100 confining its fall to a mere 9.7 points.

It was the sort of day when the stock market, which has experienced some uncomfortable sessions lately, could have taken fright, despite New York's strength on Friday.

Inflation figures, due today, and the pending decision over US interest rates, gnawed at sentiment. With investment consultant Andrew Smithers reported to be forecasting a crash, and an options bet that the FTSE 100 will suffer a 29 per cent collapse in the next month, the dark clouds could have threatened to overwhelm sentiment in typically lacklustre summertime trading.

But the billionaire Westons, who control Associated British Foods, shrugged off the nervousness, indicating that ABF was undervalued by buying its shares.

Mr Smithers suggested that investors should start liquidating their portfolios ahead of a meltdown, which he said would halve share values and leave them depressed for up to 20 years. On the options pitch, it was a deal based on Footsie slumping to 4,425 next month that overshadowed trading.

The trade may merely have been institutional covering, but it left some feeling decidedly jittery. Said one trader: "If the market is heading down to 4,425 in a month we are in a lot trouble."

The market - particularly blue chips - has suffered an acute bout of summertime blues. Since peaking at 6,626.6 last month the FTSE 100 has grown increasingly nervous, falling much more sharply than the Dow Jones average.

Fittingly, following the Weston buying, ABF led the FTSE 100 leader board. The shares gained 5.4 per cent to 430p as Weston family interests revealed they had followed up a 250,000 share buy by swallowing another 200,000 shares. ABF has been bumping along at its lowest for four years, underperforming the market by 30 per cent this year.

At one time the FTSE 100 was down 37.8 points. It closed at 6,235.4. Supporting shares were firm, with the midcappers up 19.4 points and the small cap contingent scoring an 8.9-point gain.

Kingfisher, regarded as a potential bidder for the Safeway supermarket chain since it was gazumped over Asda, rang up a 12.5p gain to 705.5p on a report that it is thinking about bidding for Norway's Elkjop, Scandinavia's largest electrical retailer.

Rentokil Initial, the services group, was another FTSE 100 constituent to improve. Ahead of figures tomorrow the shares put on 4p to 249.5p.

Having lost its 20 per cent growth image, Rentokil is in need of a deal and some believe it could descend on Williams, the alarms and locks group that has twice failed to agree a merger with Tyco, the US group.

Williams, buoyed last week by hopes the Americans will resort to a hostile strike, shaded 4.25p to 368.75p.

Billiton, the mining group which has strengthened following the outbreak of hostilities among the mining giants, succumbed to profit taking, with Deutsche Bank hastening the decline by suggesting switching into Rio Tinto. The price fell 16p to 279p.

Jarvis, the construction and rail maintenance group, managed an 18.5p gain to 317.5p after resolving a number of contractual disputes with its biggest customer, Railtrack. But the shares, at one time up 41p, are still being shunted into the sidings - they were 787.5p last year.

Torotrak, the gearbox group, motored 18.5p to 185p following investment meetings.

Enic was little changed at 134p after completing the well-signalled deal with Internet bookie Victor Chandler. Surrey, the bookmaker in takeover talks, firmed to 3p. Coffee Republic, the coffee bar chain that met analysts last week, leaving the impression in some quarters it could soon be in the bid frame, was stirred 1.25p higher to 20.5p.

Allied Leisure, following its ten-pin deal, gained 2p to 26p. Pubs 'n' Bars, raising cash and buying pubs in reverse takeovers, rose 5.5p to 63p. SCI Entertainment, on speculation it has secured a licence to create a computer game based on the film The Italian Job, was rushed 23p higher to 123p.

Tepnel Life Sciences, where stockbroker Colin Blackbourn has increased his stake to more than 3 per cent, improved 4p to 24p. Beta Vietnam Fund, returning cash to shareholders, rose 1.12p to 4.37p.

Vocalis, the speech recognition group, continued to reflect its link with Freeserve, up a further 12p at 133.5p. Football clubs again attracted attention on talk of stake acquisitions, with Chelsea Village scoring a 5p gain to 86.5p and Leeds Sporting 1.25p up at 24.75p.

Birse, the construction group, was back in the bid frame, building a 1.75p gain to 10.75p in busy trading.

Wiggins, the property and airport group, rose 2p to 22p ahead of results.

SEAQ VOLUME: 814.4m

SEAQ TRADES: 66,073

GILTS INDEX: 105.02 -0.16