LONDON Interest rates disappoint

Press, 25 August 1986, Page 26

LONDON Interest rates disappoint

PA London Share prices ended mixed two-thirds of the way through a long threeweek account after strong gains in the opening week.

The TSE 100 share index closed 2.8 off at 1607.1, while the FT 30 share index ended 0.2 higher at 1271.2. The market opened with expectations of some degree of correction after the previous week’s 75point advance on the FTSE 100 index. However, equities showed a marked resistance to downward pressure, supported by steady crude oil prices and hopes of lower international interest rates which culminated in the half percentage point cut in the U.S. discount rate to 5.5 per cent midweek. However, expectations of an imminent reduction in UK bank base rates from the current 10 per cent, after the U.S. rate cut, were diminished after

the Bank of England indicated that it did not wish to see an immediate reduction in clearing bank base rates.

Prices took on a softer tone thereafter as the prospects of interest rate cuts from West Germany or Japan seemed no nearer and they were additionally depressed after the Bank of Japan said the Japanese economy does not need a further cut in its 3.5 per cent discount rate.

The latest National Institute for Economic and Social Research quarterly review revised the expected growth in UK Manufacturing output this year to 0.3 per cent from 0.7 per cent although this appeared to have Ittle effect on sentiment. Dealers said the matket had mostly reconciled itself to flatter manufacturing growth through recent company results. The NIESR review details followed news that UK gross domestic product for the second quarter rose 0.5 per cent, in line with general forecasts, and a better than expected provisional July UK public sector borrowing requirement net repayment of £2OO million. Among companies to announce results Jaguar ended the week 58p lower at 485 after half year pretax profits of £67.4 million versus £63 million previously. Jaguar said it will raise the price of its cars in the U.S. by 3.3 per cent in 1987.

The oil sector figured among the largest gains, helped by the continued steady crude oil prices after the recent OPEC

accord on lower production levels. BP rose 39p to 640, Shell gained 30p to 885 and Century Oil put on 17p at 141. Bid news helped focus attention on the market and on Wednesday Philip Hill Investment Trust and British Printing and Communication Corp returned from temporary suspension with news of a recommended bid of around £355 million from BPCC for PHIT, valuing its shares at 367.1 pence a share. BPCC earlier announced it had more than doubled previous half year pretax profits at £27.5m sterling compared with 11.4 million. BPCC ended 14p down at 278 after it said it has 59 per cent of PHIT which finished 25p dearer at 323.

News of BPCC’s bid for PHIT saw the market soften slightly reflecting the uncertainty over the future of the latter’s portfolio which includes a 1.2 per cent stake in Beecham among holdings in leading UK companies.

Scottish and Newcastle ended 3p down at 179 in a mostly lower brewery sector, while Guinness rose 16p to 343. Banks ended slightly lower with Lloyds at 427 and Natwest at 517 both 5p easier while Midland was unchanged at 537 p. In foreign banks Standard Chartered closed the week 20p down at 709 after announcing half year pretax profits of £l3l million against £133.8 million. Insurances were mainly higher on late demand, with Guardian Royal 25p up at 844 while Royal rose 15p to 829.

Gold shares closed with gains after the gold bulliion price recovered from a midweek decline to end fixed at $U5386.25 versus 385.10. Ranfontein rose SUSI.OO to 71.50, Harties added 40c at 395, and Cons Gold advanced 20p to 489. In diamonds De Beers was 50c off at 635 after half-year results. Australian shares suffered on currency considerations in the wake of the 1986/87 budget details. BHP closed 15p down at 316.

The week’s closing prices in pounds of a selection of shares were:—

Ampol, 0.86; Allied Lyons, 3.33; ANZ, 1.96; BP, 6.40;BHP, 3.16; Bond Corp. 1-22; BAT, 4.15; British Telecom, 1.92; British War Loan, 38%; Coles G. J., 1.89; CRA, 2.41; CSR, 1.10; Dalgety, 2.78; Elders IXL, 2.01; Fletcher, 1.50; Glaxo, 9.50; ICI (Aust), 0.97; ICI (UK), 10-1/16; Loyds Bank, 4.27; Marks and Spencer; 2.09; MIM, 0.71; Nat. Aust. Bank, 2.16; North BH, 0.83; N.Z.I. 0.66; P and O, 5.05; Plessey, 1.94; Prudential, 8.64; Reed Int, 2.48; Renison, 3.14; Reuter ‘B’, 5.20; RTZ reg, 6.02 and bear, 6.10; Shell Transport, 8.83; Thorn ord, 4.87; TKM, 1.67; Trans Dev., 1.71; Unilever, 19; West Mining, 1.40; Westpac, 1.89; De Beers (quoted in SUS), 6.35.