LONDON Shares rise on announcement of more Govt spending

Press, 10 November 1986, Page 29

LONDON Shares rise on announcement of more Govt spending

By

KEIRON HENDERSON,

of Reuters (through NZPA)

London The equity market in London finished the week and the first two-week account of “Big Bang” trading firmer helped by a newspaper opinion poll showing the Conservative Party ahead of the Labour Party.

The autumn economic statement of the Chancellor of the Exchequer, Mr Nigel Lawson, was seen as having little immediate impact on fundamentals. But dealers said his plan to increase public spending was seen as the first step towards fixing an election date. The FTSE 100 index was 30.9 points higher on the week at 1663.0.

Government bonds moved in the opposite direction to equities after Mr Lawson’s speech. There were worries that increased public spending would lead to higher inflation and pressure on borrowing requirements, dealers said.

Gilts finished up to 5/16 point down on the week, having moved up in the early part of the week on the back of strong sterling and the well-received U.S. Treasury bond sales.

Some dealers said the Chancellor’s predictions of annual fourth-quarter inflation of 3.75 per cent in 1987 and increased economic growth next year were optimistic, and the outlook for interest rates remained uncertain.

Dealers in both shares and Government bonds expressed disquiet at the Chancellor’s apparent break with the last vestiges of the “MediumTerm Financial Strategy.”

There were worries that the markets could go lower in the long term if sterling and interest rates come under strong-pres-

sure on further consideration of Mr Lawson’s spending plans, which represent a departure from previously stringent policy.

The market had been nervous early in the week that news the Democrats had taken control of the U.S. Senate would send Wall Street prices sharply lower. When Wall Street reacted calmly to the news, share prices in London went ahead modestly.

Bid developments commanded much of the market’s attention this week, with McCorquodale at the centre of a struggle between its own management and Norton Opax. McCorquodale ended 24p higher at 306 after Norton Opax increased its previous £ISIM bid to £177.8M, or 340.7 p per share. Norton said Robert Maxwell, who holds 19.1 per cent, of McCorquodale, had undertaken to accept the new share offer, giving Norton a total of 51.1 per cent of the company. But McCorquodale’s management countered this with an increase in its

offer of 300 p per share to 31 Op. Norton Opax was 7p down on the week at 138 Robert Maxwell figured in another bid move this week when the Pergamon subsidiary, Hollis, made a £2B7M agreed bid for AE pic, valuing its shares at 287 p each. AE jumped 32p to 268, after touching a high of 271, while Turner and Newall, which recently bid £2SIM for AE, ended 5p off at 174 after 184 on speculation it might sell its AE stake. Other motor components issues showed GKN 9p up at 251, and Lucas 19p higher at 479 ahead of results.

Ocean Transport and Trade was up 12p to 252 after rejecting the increased £3O6M bid from lEP UK, is part of the New Zealandbased group headed by Mr Ron Brierly. S. and W. Berisford was 2p easier at 280. The company last week confirmed it is holding talks with Ferruzzi, of Italy, about the sale of 70 per cent of its wholly owned British Sugar unit. Tate and Lyle, which is reported by

the press to be interested in British Sugar, ended the week 3p higher at 580.

Glaxo shares came under pressure, falling 15p to 932, on concern that Merck’s new anti-ulcer drug, Pepcid, might cut into the market share of its drug, Zantac. Elsewhere, Beecham was 12p higher at 442, ICI, however, dipped 25p to 1075. Oil shares finished steady after falling on Thursday after third-quarter figures from Shell. Shell reported net income of £525M, against £439M last year, and market forecasts ranging from £6OOM to £BOOM.

Closing prices of a selection of stocks in London on Friday (in pounds).— Ampol 1.22, Allied Lyons 3.10, ANZBank 2.55, BHP 3.82, Bond 1.25, BAT 4.85, Telecom 1.98, War Loan 34%, ColesGJ 2.50, CRA 3.57, CSR 1.34, ElderslXL 1.90, Fletcher 2.20, Glaxo 9.27, Hanson Trust 2.13, ICl(Aust) 1.17, Marks and Sp 1.94, MIM 1.12, NatAustßank 2.47, NthßH 1.22, NZI 0.82, Prudential 8.26, Reedlnt 2.77, Reuter’B’ 5.47, ShellTr 9.42, Thorn Ord. 4.78, Western Min 2.15, Westpacß, 2.12.