Budget buy-back scare gives a lift to the well-endowed

Shares are starting to fret about the Budget. With the Chancellor's address less than four weeks away the stock market alighted on its first serious Budget scare story of the season - share buy-backs.

A rumour went the rounds that Kenneth Clarke planned to hit the tax advantages of buy-backs, and cash-rich companies would, therefore, rush to introduce schemes before the Budget. So the shares of a spread of well-endowed groups were suddenly in vogue.

But many gains were trimmed as doubts surfaced whether a Tory chancellor would want to discourage such a harmless exercise.

Still, if the market remains relatively featureless and the much heralded mega-takeover bid, said to be in the system, fails to materialise, speculation about the composition of the Budget is likely to become increasingly intense.

With New York again strong, lower interest rates hopes gaining ground and the buy-back shares making a significant contribution, the FT-SE 100 index gained 19.1 points to 3,529.1, although turnover was again unexciting.

Reuters, at one time at 601p, led the buy-back brigade, closing at 588p, up 12p. Talk of an international investment presentation was also in the air.

National Westminster Bank, 11p higher at 632p, and Associated British Foods, 8.5p at 703.5p, were others caught up by the rumour.

Great Universal Stores, 11p stronger at 571p, also enjoyed the speculation.

Schroders, another buy-back candidate, jumped 43p to 1,346p but takeover thoughts also abounded.

NatWest, soon to sell its US banking arm at a rich price, is seen as having cash burning a hole in its corporate pocket. Schroders is a likely target; so is Standard Chartered, persistently firm and up another 11p at 521p.

Legal & General, the insurance giant, remained in the bid frame. The shares hit a new high, up 13.5p at 683.5p. NatWest, keen to build its fund management side, has also been linked with L&G which has pounds 36bn under management.

The sudden urge to go private intrigued many observers. Body Shop International rose 21p to 156p; Frank G Gates, a garage group, motored 8p ahead to 71p after reporting the Gates family, with 40 per cent, may bid for the rest of the shares, and Le Creuset, the saucepan maker, gained 18p to 177p after the chairman, Paul van Zuydam, with 73.7 per cent, announced that he wanted the rest.

Unipalm, the Internet provider, surfed 52p higher to 508p as an array of influences intrigued the market. Shares of bidder UUNET have been strong in New York, lifting the value of its offer to nearer 550p, and talk of a counter-bid from KPN of the Netherlands, is also going the rounds; there is even talk of Microsoft, with 15 per cent of UUNET, bidding for the rest and mopping up Unipalm in the process.

Thames Water, which declared it had no interest in absorbing London Electricity, rose 6 p to 427p on results; London Electricity lost Monday's gain, easing to 902p.

Sears, the retailer was off 1.5p to 101.5p, ruffled by a James Capel profit downgrading. The stockbroker is said to have moved from pounds 135m to pounds 120m and from pounds 150m to pounds 140m. Other downgrades are feared.

Pilkington's acquisitions and cash call produced a 7p gain to 189p and BTR continued to edge forward, up 2.5p to 336p. There is growing US interest and at least one big buying order remains uncompleted. A year ago the shares were down to 275p. In some quarters the feeling is growing that the conglomerate is looking much sharper.

Sage fell 11p to 253p. The shares have come down from a 287p peak in the past month on rumours of a slowdown in demand for accountancy software.

BCE, the computer games group, ignored a denial of bid talks, sticking at 24.75p. Continuing talk of a drugs deal lifted Black & Edgington 0.5p to 6.25p with 13.4 million shares printed.

Chiroscience, one of the biotech babes, was another busily traded with Seaq putting volume at nearly 6 million shares. Most changed hands at 277p. The price was little changed at 282p.

A profit warning hit Life Sciences, down 36p to 86p, and Bryant, the house builder lost 6p to 98p on a 20 per cent fall in house reservations.

Black Arrow, the office furniture distributor which is subject to periodic takeover rumours, gained 4p to 43p.

Ticketing, traded at just 0.25p, remains in the doldrums with a pounds 354,000 half-year loss. A restructuring is planned.