Profit downgradings leave sour taste at Tate & Lyle

MARKET REPORT

The bitter taste of profit downgradings unsettled Tate & Lyle. Rumours filtered into the stock market that the sugar group faced a profits shortfall following an unexpected fall in prices of high fructose corn syrup, a key ingredient in foods and soft drinks.

The decline has occurred at a particularly unfortunate time for Tate as it is thought to be negotiating supply contracts with leading US soft drink groups. NatWest Securities is believed to have cut its profit forecast by about pounds 30m to pounds 270m which would mean little-changed profits this year. Kleinwort Benson also turned negative. The shares, nudging 500p last year, fell 15p to 452p, the worst performance by any blue chip.

The Tate & Lyle slide was in sharp contrast to the rest of the stock market which was back in record-breaking form, ignoring, for once, weakness in New York. Footsie rose 23.6 points to 4,219.1 and the supporting FTSE 250 index gained 16.9 to 4,587. Trading was again heavy with volume topping 1 billion shares.

There is a growing conviction that interest rates could remain unchanged until after the election. Confirmation that Christmas trading was far from robust merely strengthened the no-change stance.

New York, sharply lower during London opening, failed to have much impact. The fall, coming on top of another overnight peak, largely reflected the big sell-off in IBM as analysts scrambled to downgrade forecasts following disappointing results.

Vodafone, engaged in investment presentations, continued to dial the right numbers, gaining 15.5p to 276.5p. Orange added 8.5p to 206p.

Waters, paying little attention to Tony Blair's threatened windfall tax, moved with the tide as UBS suggested they were 15 per cent underpriced. Thames Water surged 30p to a 655p peak, up more than 100p since November, and United Utilities rose 15.5p to 679p.

Other utilities were also indifferent to Labour's rhetoric. National Power plugged in a 17.5p gain to 519p and PowerGen 29.5p to 646p.

Zeneca was given another whirl on Roche takeover rumours, up 30p at 1,672.5p. SmithKline Beecham had the distinction of being dragged into the speculation, 22.5p higher to 843.5p.

Insurances, however, had a subdued session. NatWest decided the time was ripe to take profits, taking a particularly bearish stance on Legal & General, off 4.5p to 282.5p, following new business figures. Goldman Sachs said buy Commercal Union, a suggestion which left the shares, after disappointing business figures, 13p off at 702.5p.

Hanson remained firm, 1.75p higher at 93.5p, as its energy demerger neared and Rolls-Royce, an SBS Warburg buy, gained 4p to 246p.

Banks had another resolute session with Royal Bank of Scotland celebrating its Internet scoop with a 6.5p gain to 585p. Fund managers attracted attention following stories that Dresdner, the German bank owning Kleinwort Benson, was looking to buy a fund management company. Henderson Administration gained 32.5p to 1,277.5p and Mercury Asset Management 21p to 1,276p.

Jacques Vert lost some of Tuesday's exuberance following the Littlewoods link, falling 8p to 45.5p, but Verity, ahead of expected bullish comment on its new sound system, rose 4p to 33.5p.

Pan Andean, the explorer, gained 3p to 62.5p on seemingly incorrect rumours a drilling statement was being prepared. The company, which is still examining data collected from last year's dry well, is preparing its interim announcement, which could be encouraging.

Kenmare Resources, which has found a rich gold seam at Niassa in Mozambique, firmed to 35p; there is talk of a cash offer from BHP, the Australian giant with which Kenmare has trading links.

Wickes, the struggling do-it-yourself group, perked up a little as some took the view the rights issue, due to close soon, was attracting a good take-up. The ordinary shares put on 5p to 166.5p and the nil paid rights 5p to 16.5p. Schroders acquired 4 million shares, lifting its stake to 16.47 per cent.

Critchley, an electronic component group, slumped 112.5p to 797.5p on the suspicion its margins were under pressure from the strength of sterling.

Thomas Jourdan, the Corby trouser press mini-conglomerate, jumped 7.5p to 46p. David Abell, who sold Suter to Ascot Holdings, hasbought 2.8 per cent; investors connected with Mr Abell have a further 1.7 per cent. The former Suter chief has denied he plans a bid for Jourdan.

Taking Stock

Monument Oil & Gas jumped 8p to 80.75p. The shares, which normally change a copper at a time, were encouraged by a move into little-known Turkemenistan. With Mobil, the US giant, it will help develop the country's flagging oil industry. There are suggestions of huge oil stocks in Turkemenistan, with some talking of 6 billion barrels. One analyst calculated that if the reserves were 1 billion barrels it would be worth 35p a share to Monument.

Fishers International, firm at 14p, is attracting attention. The loss adjuster and claims manager is believed to be trading well and should produce profits of pounds 1.7m last year with stockbroker Collins Stewart looking for pounds 2.5m this. In relation to other financial groups the shares are not expensive.