Market Report: Spectacular casualties as gilts plumb the depths

SHARES suffered more agony as worries about the direction of interest rates sent government stocks plunging by nearly pounds 21 2 .

The FT-SE 100 index ended 33.6 points lower at 3,121.7. Since the decline got under way around coffee time on Wednesday morning the index has sacrificed more than 100 points.

With New York in ragged retreat following the assassination of the leading Mexican presidential candidate and the North Korean and Russian situations still causing anxiety, the market was in no mood to accommodate a not altogether surprising pounds 651m cash call from Allied-Lyons, the food and drink giant.

The US interest rate increase is still ruffling sentiment. More transatlantic hikes are expected. And to compound the torment there are fears that the next British move will also be upwards, which would destroy the long-cherished hope that the Government will be able to offer the compensation of cheaper money to ease the impact of next month's round of tax increases.

Shares are now bumping along at their lowest since late November. They have lost 12 per cent since peaking at the start of last month.

The devastation in the bond markets is creating much of the equity dismay.

The company results season has been much stronger than many expected.

Profits have been up to and often ahead of forecasts, and dividend increases have been surprisingly frequent.

Many observers had felt the market would run out of steam because results would be disappointing. In the event, it has been the sudden emergence of interest rate uncertainty that has caused most of the damage. The plunge in government stocks occurred despite Bank of England attempts to halt the slide by buying gilts. Trading was often heavy with talk of extensive overseas selling.

Indications from the futures markets were that the falls could continue today.

The gilt future fell a further half-point after the physical market closed and equity futures implied an index level near 3,090.

Towards the close there had been a modest share rally, with the index climbing from a 3,111.8 low point on the back of a futures trade of 4,000 calls on a June index of 3,200.

If carried through, the deal would represent a pounds 130m spree.

Allied's rights, to buy the Spanish Pedro Domecq drinks group, left its shares 44p down at 561p. Wellcome was another spectacular casualty, off 51p to 550p on its results. There was surprise about the deepness of the Allied rights discount and disappointment with the profit forecast.

A pounds 63m cash call to repair builder John Mowlem's balance sheet lowered the shares 40p to 112p. Era, a struggling retailer, raising pounds 5.2m through a rights, held at 10p.

Cadbury Schweppes, regarded as another candidate to tap shareholders, fell 14p to 473p.

The stream of results also kept the market on its toes. P&O responded to profits at the top end of expectations with a 27p jump to 695p and Sun Alliance put on 12p to 326p as it reported a stronger recovery than many had anticipated.

It was not the best of days for debutants. MDIS, a computer group that was undersubscribed, ended at 257p against a 260p issue price. Brightstone, a property group, closed at 136p, against 125p and another property group, Newport, reached 103p from a 100p issue.

Glaxo Holdings, after its suffering of recent days, managed to stage a suggestion of a rally, up 4p to 626p on US interest.

Bowater, the packaging group, which has been weak following figures, gained 7p to 445p. The company is, it is thought, doing the City rounds.

Another to resist the downward drag was Great Universal Stores. A revival of stories that it intends to buy back its shares, or hive off its property side, lifted the price 7p to 574p.

The rumoured Vodafone deal turned out to be a dollars 37.5m ( pounds 26m) investment in Globalstar, a global satellite telecommunications operation. The shares fell 5.5p to 540.5p.

Oils fell back ahead of the looming Opec meeting which, many expect, will have little influence on prices. British Petroleum was off 5.5p to 372p. Enterprise Oil, which could be prompted to cut its dividend if oil prices remain low, shaded 2p to 411p.

Aminex, the Irish explorer, rose 4p to 64p as it disclosed that East West Oil, which has close Russian links, had acquired more shares and now held between 39 and 40 per cent.

Dealings are expected to resume today in shares of Prior. An opening price of around 6p is thought likely. The shares were suspended following the purchase of properties at Hull and Liverpool from the Hanson conglomerate and Bouverie House in London's Fleet Street. Hanson has retained a 3.5 per cent stake and there are hopes it will complete more deals with Prior.

Bruntcliffe Aggregates, created last year from an obscure investment trust, has produced profits of pounds 835,000 from a turnover of pounds 4.77m. There are hopes it could achieve pounds 2.25m this year. But takeovers could overtake such projections. The group is keen to increase its US operations and is thought to be in negotiations. There are hopes it will clinch an acquisition there soon.

Shares of Groupe Chez Gerard, the London restaurant group, are being sold at 112.5p, 16.3 times prospective earnings. The placing, by Greig Middleton, produced pounds 4m. Dealings are due to start on Thursday. GCG expects to increase profits by 69 per cent to pounds 1.62m in the year ending in June. After the float vendors and management will have 30.6 per cent of the capital.

The FT-SE 100 index closed 33.6 points down (after 43.5) at 3,121.7 and the FT-SE 250 index retreated 29.5 to 3,795.7. Turnover was 703.5 million shares with 41,822 bargains. The account ends today with settlement on 5 April.