Saddam sparks blue-chip flare-up

IRAQI dictator Saddam Hussein sparked a classic early squeeze on market bears by offering to re-admit UN weapons inspectors into Baghdad. Blue-chip shares were marked sharply higher on hopes that Gulf War Two could be averted but, after soaring 105 points, the FTSE 100 hit a brick wall.

Dismal US economic data put the brakes on. Weaker-than-expected industrial production data for August - the first decline after seven straight monthly gains - suggest US economic recovery is faltering. As Wall Street lost an early gain, London followed suit, the Footsie closing 19.2 points lower at 4025.1.

News that UK inflation edged down to 1.9% in August, from 2% in July, revived hopes that another interest rate cut could be on the agenda before the end of the year. With manufacturing still weak and retail demand slowing down, Sir Eddie George and his chums at the Bank of England could be tempted to ease further to 3 3/4% from 4%. Today's publication of the minutes of the 4-5 September Monetary Policy Committee meeting could give traders an inkling of what is to come. Sterling fell nearly a cent to $1.5370, with the euro at 63.1p.

B&Q-to-Comet retailer Kingfisher rose 8 1/2p to 215 1/2p following buying ahead of today's interim figures. Broker WestLB Panmure forecasts pretax profits of £254m, from £217m, and expects a strong performance from B&Q but a poorer one from Castorama in France.

British Airways taxied to 133p on hopes of peace before closing only 2p better at 123p. Still reeling from last week's dire interim figures, BAE Systems nosedived 16 1/2p more to 218p.

Ahead of its relegation from the Footsie next week and in sympathy with the plight of British Energy (6p down at 12p), International Power lost 4 1/2p to 100p.

Dull insurers reflected fund-raising worries as Swiss giant Zurich Financial, owner of Eagle Star, agreed underwriting for a £1.6bn cash call. Aviva shed 15p to 375p, Prudential 14p to 396 1/2p and Royal & SunAlliance 3 3/4p to 107 1/4p.

Cable & Wireless lost an early gain of 6p to close 4 1/2p lower at 138p. More than 28m shares changed hands as rumours of a profits warning did the rounds. Chief executive Graham Wallace sold a US telephone business on Monday for £21m, swelling the £2.6bn cash pile.

Buyers switched on to Capital Radio, up 25p at 485p. Broker JP Morgan upgraded it to 'buy' and said that the departure of Chris Tarrant from the 95.8 Capital FM breakfast show will have less impact than the market fears. Audience levels tend to show resilience even after major changes in presenters.

Computer services group Dicom rose 9p to 420p after record annual pretax profits. Before goodwill and exceptionals, they rose 13% to £10.8m. The dividend is raised 15% to 4.2p. Bede, maker of x-ray tools that spot faults in semiconductors, collapsed 40 1/2p to 61p after forecasting higher-than-expected first-half losses.

Niche broker Evolution Group, which this year acquired Beeson Gregory, held at 36 1/2p following interim figures and confident comments about second-half prospects. Chief executive Alex Snow bought 60,000 shares at 34p, directors Richard Griffiths a further 230,000 at 34p and David Norwood 100,000 at 34p.

Film distributor Winchester Entertainment jumped 5 1/2p to 18p following Helkon SK Film Distribution's purchase of 280,000 shares, lifting its holding to 3.7%. News that money broker Tullett & Tokyo Liberty had received a bid approach helped NewMedia Spark edge forward 1/4p to 9 1/2p. NewMedia, which holds an 11% stake in Tullett, revealed last week that it had received an approach. Dealers believe Collins Stewart (1 1/2p easier at 313 1/2p) will soon launch an offer for both NewMedia and Tullett.