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European rate cuts power Footsie to record high; MARKET REPORT

Blue chips came close to breaking through the 3,900 barrier. The FT-SE 100 index closed at a peak, up 19 at 3,891.1, with hopes of lower interest rates providing much of the momentum.

There is a widely held belief that once Footsie climbs above 3,900 the magical 4,000 target would quickly fall.

This month, in admittedly unimpressive trading volumes, the index has climbed a remarkable 187.9. Often the stock market has looked taut and many experts have questioned the strength of the advance.

But unhelpful developments have been shrugged aside and the market has been content to dwell happily on more positive influences.

Yesterday it was the German interest rate cut. Other Europeans quickly followed. With the Bundesbank seen as having room for a further reduction and the Americans holding their rates earlier this week the chances of another UK cut have clearly improved.

The fall in retail sales in June, nipping hopes of a consumer boom, has also underlined the cheaper money argument.

The surge was not confined to blue chips. Second liners, as measured by the FT-SE 250 index, enjoyed another eventful session. The supporting index gained 15.1 to 4,402.5, taking its tantalising winning sequence to 17 sessions.

It is, however, still a long way from its record high - 4,568.5, hit in April.

Prudential Corporation, the insurance giant, had an active session, up 17p at 442p, with stories flowing about its Mercantile & General reinsurance arm. The Pru has said it intends to float M&G but some took the view the share offer would not take place - because the Pru had received a bid from another reinsurer which was too good to refuse. Another suggestion was that any flotation would occur much earlier than originally planned.

It had been thought M&G would be valued at around pounds 1.2bn in a market share sale with the Pru collecting pounds 500m whilst retaining a controlling stake.

BAT Industries was another active share - but it again headed south. The Clinton administration's move to classify nicotine as a regulated drug routed the price 24p to 422p, lowest for two years.

Hanson, planning to float its Imperial Tobacco group as part of its fourway demerger, has little representation in the US and any Clinton action would have little, if any, impact. The shares edged forward 3.5p to 162p.

BTR failed to respond to a buy suggestion from Panmure Gordon. The stockbroker expects the dividend to be cut next month - to 10.3p - but draws attention to a possible pounds 1bn disposal programme which should streamline and strengthen the group. The shares lost 3p to 250p.

Berisford, the Magnet group, was another in retreat - because of industrial action. A strike at its kitchen factory at Darlington lowered the shares 13p to 160p; they were 220p in June.

Zeneca, with a presentation rumoured, had another rousing session. In early trading the shares soared 24p. They closed 7p lower at 1,507p.

Ladbroke, up 2.5p to 203.5p, was helped by a Barclays de Zoete Wedd calculation the shares were worth nearly 250p.

Cable and Wireless, riding at 546p earlier this year as a BT merger seemed likely, gained 6p to 415.5p with a variety of rumours swirling round.

They ranged from an investment roadshow to an elaborate story that Granada could take on Cable's Mercury telephone network. Granada, up 6p to 857p, would then join the demerger bandwagon, splitting itself into two stand alone companies, one embracing leisure, the other media and telecommunications.

Interest rate considerations helped builders with the German cut encouraging RMC, up 23p to 1,075p, and Redland, 15p to 450p.

National Grid, responding to the Offer price proposals, gained 7p to 178p. Northern Electric glowed 16p to 544p, seemingly on dividend buying.

Albert Fisher, the food group, embarked on a round of investment meetings with a "no surprises" message. The shares were predictably unfazed, losing 0.5p to 45p.

Weir, the engineer, put on 18p to 234p as interim profits, although lower, came in above expectations but Dawson group reversed 41p to 125p following a 19.7 per cent interim setback.

Greenhills, the restaurant group, added 2p to 8p and Electronic Retailing Systems, AIM's only Nasdaq share, put on a further 15p to 218p; the shares of the group, supplying electronic shelf labelling systems for superstores, arrived at 145p in July.