Market Report: High-flying account ends in disarray

The record-breaking account ended with a ragged retreat yesterday as profit-takers pulled many recent high-flyers nearer to earth.

The FT-SE 100 index crashed 37.5 points to 2,915.9, wiping, Datastream calculated, pounds 7.3bn from stock market values. At one time it was down 48.6. A little new-time buying late in the session trimmed the decline.

A host of influences conspired to put prices under pressure. The sharp overnight fall in Hong Kong as relations between the colony and China became even more strained ensured a subdued opening.

The worsening situation in Russia and further government embarrassment over Maastricht merely piled on the agony.

Next week's Budget and the Taurus fiasco were other unsettling factors. With Continental markets in retreat and New York opening sharply lower, even talk that the Chancellor will produce another interest rate cut next week, perhaps half a percentage point, failed to have any significant impact.

Despite the slump the FT-SE index has held on to a 47.9-point gain over an account in which it hit four new highs. 'The market was overbought. It was due for a correction,' one trader said.

Since the start of the year the index has gained 69.9 and the advance since September's enforced devaluation is more than 432 points.

Many observers were encouraged that the index managed to cling above 2,900, a level first achieved last week.

Shares related to Hong Kong were obvious casualties. Cable and Wireless fell 10p to 713p, HSBC, the banking group reporting year's results on Monday, 37p to 604p and Inchcape 26p to 583p.

Dividend buying - the shares go ex-dividend on Monday - and a rumoured buy recommendation from Barclays de Zoete Wedd helped Imperial Chemical Industries to buck the trend, gaining 9p to 1,272p. Heywood Williams, up 53p to 239p, was the day's best performer, reflecting its pounds 95m glass division sale to Pilkington, up 7p to 108p.

Arjo Wiggins Appleton, the packaging group, fell 4p to 171p. Figures are due next week. NatWest Securities expect a pounds 72m fall to pounds 160m and say 'sell'.

The insurance group Legal & General, also reporting next week, fell 14p to 471p. Profit expectations range from pounds 95m to pounds 130m with a chance of a dividend increase to, perhaps, 19.5p.

The battle for Owners Abroad continued with Airtours, through BZW, offering 150p cash a share. BZW is thought to have pushed the Airtours stake to about 9 per cent. Mercury Asset Management is rumoured to have accepted for its 15 per cent stake. Airtours rose 6p to 339p and Owners 6p to 147p.

It was SmithKline Beecham's turn to take the drugs flak. The US Food and Drug Administration caused some surprise by holding back approval of SB's Kytril anti-nausea drug. The shares fell 21.5p to 469.5p.

Glaxo Holdings slipped 3p to 665p. A profit warning from Huntingdon International, the environment and healthcare group, reduced it 45p to 163p.

Eurocamp, down 65p on Thursday after a cautious statement, fell 8p to 251p. Hoare Govett has reiterated its sell advice, cutting this year's forecast from pounds 9.7m to pounds 6.3m and next from pounds 10.5m to pounds 7.4m. It suggests the shares should be 210p.

Vodafone Group was 6p lower at 409p, unsettled by talk of a hovering line of stock. Bowater, the packaging group, slipped 9p to 503p. Its rights issue was 92.76 per cent taken up and Hoare Govett easily placed the rump.

Retailer W H Smith continued to ignore the disappointment of its removal as a constituent of the FT-SE index. Helped by buy advice from Smith New Court, the shares rose 7p to 434p.

Rank Organisation also shrugged off the gloom - just. The shares rose 1p to 664p as Shaw & Co described the shares as 'one of the favourite recovery plays' and suggested outperformance in the next year.

But the food and drink group Allied-Lyons failed to respond to bullish noises from Nikko Securities, falling 8p to 563p. Nikko think the shares, which have underperformed 22.5 per cent in the past year, are oversold.

Cussins Properties, a Newcastle upon Tyne housebuilder, jumped 12p to 58p as chairman Peter Cussins sold some of his shares to another director, Ian Waites.

The group is expected to resume dividend payments this year and there was talk that the shares had been overlooked in the recent housebuilding advance. The company last paid a dividend in 1990.

The FT-SE 100 index fell 37.5 points to 2,915.9 and the FT-SE 250 lost 22.3 to 3,099.5. The FT-SE 350, combining the two, ended 16.7 down at 1,439.1. Turnover was again strong, reaching 769.3 million shares with a remarkable 46,356 bargains completed. In thin trading government stocks were mixed

The debate about Queens Moat Houses' debts continues. Nigel Reed at Paribas says worries over off-balance sheet debts at the hotel group are 'misplaced' and problems in Germany are already factored into forecasts. He suggests the shares, down 1p at 45p, are a 'tremendous play on a hotel trading recovery especially in the UK' and should be picked up.

The signalled move by Cap Gemini Sogeti, the French giant, to mop up the minority shareholdings in the Hoskyns computer group, is thought to be imminent. It was suggested yesterday that the offer document would be posted on Monday. The French have promised to pay 'not less than' 469p a share for the outstanding 30.2 per cent. Hoskyns edged ahead 1p to 458p.

BZW has launched three series of warrants on the FT-SE 250 index. They will offer index funds a chance to hedge cash more efficiently and provide private investors with a geared exposure and more choice. The 250 index has outperformed the FT-SE 100 index by 5 per cent. BZW say the warrants offer a chance to increase returns as the economy comes out of recession.