The Guardian from London, Greater London, England • 30

A Big Bang approach with a large number of stocks is dangerous Capel-Cure Myers Our members appear to be reasonably happy with existing arrangements National Association of Pension Funds We have failed to convince market users of the need for change NatWest Markets Notebook Wall Street sails on regardless Patrick Donovan and Paul Murphy troducing "order-driven" trading, which is based on dealers posting the size of bargain they wish to deal. Leading brokers such as BZW, Capel-Cure Myers and Winterflood Securities joined with bodies such as the National Association of Pension Funds to say that they saw no pressing reason to change the way the markets work. The Office of FairTrad-ing warned that it could investigate some aspects of the Stock Exchange's proposed reforms which come under its control. Capel-Cure Myers said: "We remain to be convinced how the introduction of order-driven systems will add material benefits." sents the biggest market upheaval since Big Bang in 1986. But several of its leading members insisted yesterday that they saw no need for any change in the existing "quote-driven" system whichrelies on market makers posting prices at which they are prepared to buy and sell shares.

Their views were made known after the exchange tried to widen the debate over the market's future by making public more than 100 responses it had received to a questionnaire about reforming the share market. Many made it clear that they still have grave reservations about the exchange's plans to square up to growing European competition by in Michael Marks, co-head of global equities at Merrill Lynch, said: "There needs to be an overwhelming demand from the majority of the market participants and users in favour of a move towards order-matching within the trading processes of the London market before such a major step is taken. "Failure to test proposed changes at both the macro and detailed level against the overall objective of retaining the willingness to undertake risk may result in the irreversible diminution in the stature of the London market." Brian Winterflood at Winterflood Securities refused to fill in the questionnaire, saying this would be "tantamount to giving a tacit approval to something that is not Natwest Markets said: "We should not move forward with a new structure simply to meet a self-imposed time deadline." Scottish Widows, one of the institutions concentrating on the retail market, said: "We are relatively satisfied with the current regime, which offers small investors access to relatively cheap dealing facilities and allows larger institutions such as Scottish Widows access to significant risk capital." Some big institutions, such as BP Investments and Mercury Asset Management, indicated that reforms were needed. BP said: "Changes are being forced on the markets from three main areas. They are Liffe, overseas investors and the UK market makers.

The UK market makers are now owned by companies who put risk control above supplying liquidity to a quote-driven market." But other institutions, such as the Prudential, insist the "no change" option should be examined. UBS said the exchange should "concentrate on being the global exchange for UK it could, and in our view should, offer a competitive service in emerging markets where the local exchanges and investor bases are not yet Alex Brummer- HE Stock Exchange 'faces huge pressure to suspend its plans for restructuring the share market after being confronted with a virtual vote of no confidence by many of the City's most powerful broking houses. Dozens of the biggest financial institutions made it clear yesterday that they refuse to support die exchange's plans to introduce European-style "order-driven" trading by its self-imposed August deadline. The exchange has offered the City further time to liaise over a reform which repre Facing the music Jiirgen Schneider arrives under guard at Frankfurt airport after nearly two years on the run with his wife Claudia (above) photographs: apreuters Tycoon takes flight to prison first class, naturally Dow Jones has performed so mightily over the past year is that the 30 corporations which make up the index have been through their own micro-revolution. In fact, it is the drive for shareholder value in the shape of the US tele-corns group, shedding 40,000 jobs along with its de-merger which has so infuriated Pat Buchanan and reinforced his anti-corporatist sentiments.

Other DJIA-30 companies which have been through the restructuring mill include: the conglomerate ITT, Minnesota Manufacturing and Mining (better known as 3M), American Express and IBM. Analysts'estimates suggest that this has been worth at least a 1000 point rise in the Dow, as investment value has been released. The same phenomena has been seen in the UK, but to a lesser degree, with the proposed break-up of Thorn-EMI and Hanson. This release of shareholder value has co-incided with an important substitution among US investors who, in the 1990s, have moved cash out of low-interest cheque and money market accounts into mutual funds, which invest in shares, and offer better returns. Investors, particularly those from the baby boom generation, have been piling into the equity markets.

Currently, mutual funds in the US the equivalent of our units trusts and Peps have some $3,000 billion invested, of which some 45 per cent are in the stock market. Although there has long been a tradition of popular capitalism in the US, the current situation is regarded by US economists as a sea change. AT PRESENT, and in real terms, the percentage of household wealth held in stocks and shares is reckoned to be in the order of 33 per cent. This is still below the peak of 40 per cent reached in the 1953-65 era, which suggests that the current Wall Street surge has headroom, particularly if theUSeconomy continues to grow, even at a more sedate pace. Mutual funds have become the new savings of preference, the holding pen for cash destined to pay school and university fees, put down a house deposit and prepare a nest-egg for retirement.

They have come to occupy much the same territory in the US as the Pep, in all its manifestations, would hope to conquer in Britain. The other factor which has driven Wall Street to new peaks is the surge in technology stocks, not so long ago considered a minority interest. Late last year hi-tech stocks were suddenly viewed as overvalued after leading funds, including Fidelity Magellan cut back their holdings. However, one of Wall Street's tech gums, Ronald Elijah, has changed his mind and is hoovering up hi-tech shares including IBM, and Digital Equipment. Not surprisingly, this week's Wall Street rise has been acompanied by a hi-tech revival with IBM up 3.3 per cent alone, late in the week, to its highest point for a year.

Big Blue is back where it used be, as a Wall Street bellwether. It would be nice to believe that the flow of funds into New York has created the ideal investor scenario: ever increasing share prices. But cautious investors know that at the end of every bull market there is a turn, usually brought on by rising inflation and higher interest rates. That may be temporarily postponed by a cyclical downturn in global prices, but no one should count on it. IT MIGHT have been thought that with a Democrat in the White House corralled by Congress and a Republican, labelled an extremist and, worse, the early leader for his party's presidential nomination, Wall Street might be in a state of nervousness.

Not a bit of it. In Thursday trading the Dow Jones had its best day since the US economy was pulling robustly out of recession in January 1991. Indeed, over the past year Wall Street has climbed 38.7 per cent, a bravura performance which puts every other developed market in the shade. This year alone New York has added just under 10 per cent with the most recent gains across all equity markets. The relentless upward drive in New York stocks this week was partly driven by changes at the Federal Reserve.

The reappointment of Alan Greenspan to a third-term as chairman was always likely but, nonetheless, reassuring. In the ten years since he was appointed by Ronald Reagan to succeed Paul Volcker, Green-spanhas developed an invincible reputation. Like all central bankers he has been criticised, particularly by the Clinton White House, for over caution on interest rates. In fact, he has been remarkably agile in shifting rates to meet changing economic trends. As important, perhaps, as Greenspan's appointment was the choice of Alice Rivlin veteran Washington economist as his deputy.

She is seen as one of the surest forecasters in the US capital and has less of the political baggage of Clinton's preferred candidate Felix Rohatyn of Lazard Freres. Rohatyn's reputation rests on his role as a financial fixer, in the Harold Lever mould in the UK. But he is also viewed with some suspicion dri Capitol Hill where, as Fed deputy chairman, he would have to go for ratification. The latest rally in Wall Street stocks could be seen as a vote in favour of monetary stability, helped along, perhaps, by the Fed chairman's own analysis earlier this week when he indicated there may be room for further easing. BUT IT is much more than that.

There is evidence that important structural changes have been taking place, too. As far as the Big Board is concerned the trend to releasing shareholder value demerger fever among the blue chips has been a key factor. This market incentive has been underpinned by structural changes among them rediscovery by Americans of all ages, including the baby boomers, of the value of saving and investment after decades when consumption has been the king. Finally, the America of the 1990s has rediscovered its skills in inventing and making things in the shape of the hi-tech sector. Whereas for much of the past decade the US has suffered a skills and manufacturing inferiority complex in relation to the Japanese and others, the nation's research and technological skills have now become a real factor for the stock market.

Among the reasons that the rt ii.fi'':i 'i IAN TRAYNOR sees return to stand trial FUGITIVE Jurgen Schneider bricklayer, business school graduate and estate agent extraordinaire was behind bars last night after almost two years on the run fleeing charges in Germany's biggest property scandal since the war. Mr Schneider, aged 61, and his wife Claudia, 50, Industrial slowdown spreads across Atlantic The Schneiders emerged from the first-class compartment of a Lufthansa jet yesterday after a row over their flight arrangements and who should foot the bill. The Hesse state authorities agreed eventually to meet the cost of a special deal for first class travel on grounds of security. The Schneider trial, ex Chief Secretary to the Treasury, launched an immediate defence of the UK's investment record. "There are a lot of myths about investment.

In fact, it is a British success story," he said in a statement. Mr Waldegrave pointed to CSO figures showing that capital spending by manufacturing companies was 6 per cent higher last year than in 1994. "This is the second year in a row that it has risen at a healthy rate, and we expect this to continue." The pattern of investment during 1995 highlights the recession in the construction industry, with a 7 per cent fall in spending on new buildings, Mark Tran in New York and Richard Thomas FEARS that the UK could follow the US into a preelection economic slowdown were fuelled yesterday by evidence of British manufacturers putting investment plans on ice in the face of weakening overseas demand. Although Treasury officials shrugged off the gloomy data, stressing the longer-term improvement in factory capital spending, some City analysts were busily downgrading their growth forecasts for 1996. The Central Statistical Office said capital spending by fugitive couple in Germany were remanded by a Frankfurt judge pending trial on an expected six charges of fraud and falsifying papers, and abetting fraud, to fund the building boom and property purchases he undertook after German unification in 1990.

His empire collapsed in 1994 leaving at least DM5 billion (2.3 billion) debts. factories between October and December was 2,991 million, 9 per cent lower than in the preceding three months. Economists said firms could be mothballing spending on new plant and machinery because of a sharper-than-expected drop in exports. Figures from the US commerce department confirmed a further deterioration on the other side of the Atlantic, with the annual rate of expansion in one of Britain's key markets down to 0.9 per cent in the last quarter of 1995 half the rate pencilled in by Wall Street analysts. The American economy grew by only 2.1 per cent in 1995, the commerce depart have started a worldwide slide in prices, which are kept as high as they are only because of the De Beers cartel.

Owners of diamond jewellery would have found all but the rarest and largest stones diving in value, and the turbulence would have wreaked havoc in poorer diamond-producing nations such as Botswana and Namibia. While aware of the dangers of a price crash, Russia desperate for dollar earnings continued to sell unofficially and to threaten to break the cartel. But it is thought the 6.6 billion International Monetary Fund loan announced on Thursday may have helped take pressure off the Russian authorities. The new deal will run for three years rather than the previous five and will cover not only newly mined diamonds but also the Russians' strategic stockpile, from which much of the unauthorised selling took place. In addition, this deal has been signed with the central government rather than a state agency.

And De Beers will no longer be "buyer of last resort' of stones the Russians have not been able to sell. The tycoon was traced to Miami last May from where he fought the German authorities' extradition case until last month when he agreed to return. He fled Germany in April 1994 as Ids huge property bubble burst and Deutsche Bank, the country's biggest commercial bank and his main creditor, pulled the plug. ment said yesterday the weakest performance since the recession year of 1991, when the economy shrank by 1 percent. Jonathan Loynes, UK economist at HSBC Markets, said: "Coming on top of the poor investment figures, the US data look very worrying.

Export markets have weakened significantly. The risks to growth are now significantly on the downside." Dealers in London and New York were immediately placing bets on further cuts in interest rates to keep the two economies moving and encourage firms to commit to capital projects. But William Waldegrave, Airwaves Lisa Buckingham COMMERCIAL radio increased its advertising revenues by nearly 23 per cent to 270.2 million last year, accounting for more than 4.2 per cent of the UK's display advertisement spending. The rate of revenue growth slowed from 23.4 per cent in 1994 and 26.4 per cent the year before but still means that commercial radio is by far the fastest-growing advertising medium. Five years ago it claimed only 2.7 per cent of the advertising market.

Figures from the Radio Advertising Bureau show that national advertising remained the powerhouse of growth. The launch of national stations such as Classic FM helped to spark the revival of radio's advertising fortunes and schemes have now been launched allowing national advertisers to buy slots across themed local and regional programmes. Last year, national advertising grew by 28.1 per cent, 5 per cent above the total. That gap was, however, narrower than the year before when the instituting bankruptcy proceedings. The case could prove a further embarrassment for Deutsche.

When the Schneiders fled to America, the bank's chief, Hilmar Kopper, damaged its image by describing as "peanuts" the millions of marks the former estate agents owed to small clients. ment shutdowns as the Clinton administration and congressional Republicans bickered over a balanced-budget plan. Other factors that proved a drag on growth included weakness in consumer spending and a big decline in inventories as businesses moved to reduce their stockpiles of unsold goods. Last year's anaemic performance took place against a background of rising interest rates as the Federal Reserve mounted a pre-emptive strike against inflation. The Fed has since trimmed rates three times since last July to prevent the economy skidding into recession.

Car insurance AA members Cliff Jones HE AA last night stepped up competition in the car insurance market by unveiling plans to offer direct policies to its 500,000 members. The motoring organisation will start its direct insurance arm this year, subject to Department of Trade and Industry approval. It also plans to offer direct house insurance to members next year. With 2 million policies, the AA already runs the UK's largest broker service, which was set up in 1967. Mark Wood, managing director of A A Insurance, was confident it could compete with other direct insurers.

He said: "We are putting 14 million into the new operation and we already have one of the country's largest telesales operations, Our only competitor is Direct Line." Others moving into the direct market include Halifax building society, which is launching an operation to complement its new telephone banking arm. pected to open before the end of the year, may see their lawyers trying to turn the case into an indictment of Deutsche and the German banking system. Mr Schneider consistently claims he has been a victim of banking potentates who arbitrarily decided to make an example of him by withdrawing his credit lines and but increases of 4 per cent for vehicles and 9 per cent for plant and machinery. Separate figures from the CSO showed that factories were only slowly running down their plentiful stocks during the last quarter of 1995. Overall, firms stored goods worth 647 million between October and December, down from 769 million in the preceding three months.

Simon Briscoe, an economist at Nikko Europe, said: "This suggests that the stock unwinding will be later, or bigger, or both." In the US, analysts said growth in the last quarter of 1995 had been adversely affected by two partial govern- dicted that commercial stations' audience share will increase by another 20 per cent. The stockbroker Panmure Gordon warns that radio's earnings could be hit by next year's launch of Channel 5. The TV station is expected to offer discounts to advertisers in order to establish itself. This will compete directly with commercial radio but may also attract advertising that would otherwise spill from ITV and Channel 4 to radio. 2007, 93 54I Source: Advertising Association 44.

miii mum "581 Rouse pays $500m for Bast lure advertising De Beers and Russia cut deal to avert diamond crisis growth in national revenues outstripped the total by 9 per cent. The proportion of national advertising is expected to decline, according to the Henley Centre, which expects commercial radio to be pulling in revenues of almost 350 million by the end of the decade. But commercial radio's assault on the BBC's audience it now accounts for more than 50 per cent will continue. The outgoing head of BBC Radio, Liz Forgan, has pre Long-term revenue forecasts 1994 Total advertising his estate was drastically reassessed by the Internal Revenue Service in 1977 at $460 million, still a significant sum. Most of his assets have been sold off over the years, leaving property owned by the Howard Hughes Corporation.

Its holdings include the Fashion Show Mall on the Las Vegas Strip, Summerlin, a community in north-west Las Vegas, and several other commercial and industrial sites. Rouse is also a partner in a huge Player Vista development recently announced in Los Angeles. The site near the airport was used by Hughes in the 1940s to build and house the Spruce Goose, an enormous eight-engine wooden flying boat that could carry 700 passengers. The Los Angeles landmark has been chosen by DreamWorks, Hollywood's newest film company, for its state-of-the-art studio. Rouse will pay $520 million for the Howard Hughes Corpo-' ration.

The terms of the deal give Hughes shareholders half of any future profits likely to be millions of dollars on the resale and development of most of the undeveloped Hughes land. Dan Atkinson klAMOND company De 'Beers and the Russian government appeared last night to have resolved their differences and staved off a worldwide collapse in gem-stone prices. Agreement on the control of about 95 per cent of Russia's diamonds has been struck six days ahead of deadline. De Beers controls the sales of about 80 per cent of the world's uncut diamonds, and Russia, producing 25 percent of all diamonds by value, is the second-largest producer (De Beers is the biggest). A five-year deal signed with the Soviet authorities ran out at the end of 1995 and talks with Russia about renewal seemed deadlocked.

Meanwhile, De Beers's grip on the world market was shaken by huge unauthorised exports from Russia, thought to have totalled $500 million in 1993 and $1 billion in 1994. There was talk that Russia would leave De Beers's Central Selling Organisation (CSO) and market its own diamonds. Were the Russians to have flooded the market, it would Mark Tran In New York 'HE Final bell tolled for the business empire created by Howard Hughes when his heirs yesterday sold the last assets still under the famous Hughes name to Rouse, a large developer of shopping malls, for more than $500 million (325 million). Howard Hughes built a sprawling empire that spanned aircraft and satellite construction, casinos and Hollywood studios. He owned the Hughes Aircraft company, RKO Pictures Corporation, and a controlling interest in Trans World Airlines.

As a Hollywood producer, Hughes was behind successes such as Hell's Angels and Scarface. Once one of the richest men in the world, in the 1950s Hughes turned ever more reclusive. After his disappearance from public view, he even refused to have his photo taken. When he died in 1976, Hughes was a virtual prisoner of his own making in a Las Vegas hotel room, with a morbid fear of germs and people. Hughes's fortune then was believed to be worth between $1.5 billion and $2 billion.

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