B for British sparkle signals belated festive upturn

MARKET REPORT
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Hopes are rising that the stock market will, if somewhat belatedly, experience another rip roaring festive upsurge.

Steve Wright at Barclays de Zoete Wedd said: "As long as there are no US budget shocks we should see further UK strength".

The FT-SE 100 index rose 19.6 points to 3,633.3, a two day gain of 56.4 points. It is 47.1 below its peak, hit at the start of the month.

The feeling is strengthening another interest rate cut will occur early in the new year. The base rate reduction to 6.5 per cent, announced last week, was seen by many observers as the first part of a half-a-point move. With the US and Germany following the UK example the scene is set for the Chancellor to deliver the second half.

New York played a significant part in Wednesday share rally. Its late overnight slump created a few shudders in early trading but rate hopes and the feeling Wall Street's sudden decline was little more than a short term aberration soon encouraged shares to move ahead.

British, for once, was a rewarding prefix. A return of GEC takeover speculation, thoughts about the proposed Orange mobile telephones flotation and ABN Amro Hoare Govett support combined to lift the shares 21p to 779p, against an 835p peak.

Although GEC is thought to have left it too late to capture BAe (once British Aerospace) the rumour continues to go the rounds. BAe's escape from GEC will be underlined by the Orange share sale. likely to value the company at more than pounds 2bn. BAe has 30 per cent of Orange.

British Gas and British Steel were others in demand; so was British Telecom, (better known these days as BT). Shares of British Gas flared a further 7.5p to 257.5p; BS recovered 3p to 154p and BT edged ahead 5p to 351.5p.

Rolls-Royce, with John Rose named as new chief executive, was the best performing blue chip, up 8.5p to 185p.

Racal Electronics gained 5p to 283p as it was named Henderson Crosthwaite's share of the year.

Henderson's Brian Newman is encouraged by the group's pounds 135.75m acquisition of British Rail's telecom side - and expects profits to grow from this year's forecast pounds 72m to pounds 130m in 1998. Break up value is believed to be 330p a share.

Smith & Nephew, the healthcare group often boosted by takeover thoughts, failed, however, to get any seasonal cheer from Kleinwort Benson. The securities house cut its profit estimate from pounds 175m to pounds 167m and downgraded its advice from buy to hold. The shares fell 4p to 190.5p

Poor trading statements took their toll. McDonnell Information Systems continued its lamentable performance, falling 24.5p to 36.5p; T Clarke, an electrical contractor, warned of a pounds 1m loss and dropped 7p to 42p while Arcolectric signalled lower second half profits, falling 25p to 210p.

Victrex, an ICI management buy-out, was the star performer. Placed at 170p the shares surged to 240p in heavy turnover. The engineering company Unicorn International had a much more subdued time, at 134p still close to its placing.

Take over action created a few small pockets of excitement. Abbot, the building materials group once known as Unigroup, slipped 3p to 52p as it mounted an pounds 8.2m offer for OIS International Inspection, up 7p at 25p.

Mid Kent, water company, splashed 77p higher following a French offer while Ennemix, an aggregates group, jumped 12p to 32p following a bid from Redland, the building materials group. Redland already has a 30 per cent stake.

Independent Insurance, which is acquiring a French financial group, rose 27p to 361p.

The bid for Mid Kent was enough to inspire its much bigger and adjacent Southern Water 27p higher to 695p. The French, it was pointed out, descended on Northumbrian Water after buying the nearby smaller water businesses.

Vaux, the brewer and hotelier, rose 18p to 275p on bid talk in a weak drinks market.

National Grid continued to disappoint, falling 1.5p to 199p as the market awaited more share sales from the electrical utilities.

The shares did touch 230p in unofficial dealings and there were hopes that with the lure of a near 6 per cent dividend yield they would quickly return to such a level once full trading started.

Eidos, the video images group, jumped 75p to 660p on trading hopes and Stanford Rook, the bio babe, rose a further 30p to 255p. It is planning to raise pounds 1.75m by selling shares at 200p.

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