Footsie continues to defy gravity as foreigners pile in

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Footsie, despite the chorus of caution from pension fund managers, surged above 4,900 points for the first time.

At one stage it was riding at 4,903.2. A weak Wall Street prompted a little top slicing and at the close the index was resting at 4,899.3.

Blue chips' seeming ability to defy gravity is mystifying many observers and no doubt causing considerable embarrassment to the army of fund managers who have been attempting to talk the stock market down.

There is, of course, no doubt that on most historic measurements blue chips are looking increasingly expensive. But London, argue Goldman Sachs, is still relatively underpriced compared with other European markets.

The still favourable outlook for the British economy and the nation's long -term political stability are other influences encouraging foreigners to pile into London.

The growing overseas interest is one explanation for the dramatic outperformance of blue chips in this bull run.

It was again very much a leaders party yesterday with the FTSE SmallCap index actually surrendering ground.

Top financials made much of the running. HSBC surged 85.5p to 2,086p and Lloyds TSB added 22.5p to 697.5p. Dresdner Kleinwort Benson and Lehman Brothers provided the lyrical background. Lehman put a 2,200p valuation on HSBC with DKB going for 2,400p. DKB's other banking target prices were thought to be 1,350p for Barclays (1,252.5p); 830p for Lloyds and 1,050p for Standard Chartered (1,000.5p). But SBC Warburg ensured National Westminster, off 5.5p to 853p) missed the fun, reducing it from buy to hold.

Takeover talk was again heard at First Leisure Corporation with Rank, off 17p at 350.5p, named as a possible bidder. Bass, 22p higher at 850p, was also in the frame. Scottish & Newcastle, helped by Credit Lyonnais Laing, and Whitbread were strong.

Cable & Wireless, 11p firmer at 596.5p, enjoyed Panmure Gordon support, with the stockbroker hanging a 700p target price on the shares.

Cadbury Schweppes hardened 14.5p to 591p. There is talk its interim figures have been pulled forward to early next month. Usually the soft drinks to sweets group reports in September. Many believe it is under intense pressure in the US soft drinks market but it could be faring better than the market thinks and wants to get its more cheerful message in circulation.

Great Universal Stores edged forward 7p to 624.5p. It is holding what is probably its first-ever analyst and fund managers investment excursions. Yesterday analysts went to Nottingham to see the operations of Experian, its consumer credit operation. Today its the turn of fund managers.

Superstores made headway as BZW issued its fourth "trolley" covered warrants on the sector. Idea is holders of the third batch, up 160 per cent since they were issued last year, can roll over into the new issue. J Sainsbury gained 9p to 433p (director Sir Timothy Sainsbury sold just over 1 million shares at 431.5p raising more than pounds 4.5m) and Tesco put on 3p to 432p.

Some second-line chemicals were firm, largely reflecting the Ellis & Everard results. Ellis rose 10p to 250p pulling British Vita 8.5p higher to 209p. Imperial Chemical Industries edged ahead 8p to 888p.

Centrica, which signed its first deal to supply gas to the Continent, softened to 79.75p,. More such deals are expected and Panmure Gordon believe the shares could go to 100p. Centrica's old partner, BG, flared 14p to 241.5p.

Newcomer Delcam , a computer software group, closed at 267.5p from a 260p placing; another debutant, Hitachi Credit, controlled by the Japanese giant, moved from a 135p placing to 144.5p.

Waters were happy to shrug off the latest watchdog regulatory soaking with Thames up 11p to 771.5p.

Rolls-Royce at last pulled out of its dive, recovering 6p from its year's low to 222p; it is building a pounds 35m electricity generator station at Fort Dunlop, near Birmingham.

Smith & Nephew, the healthcare group, jumped 7.25p to 171.75p as Salomon Brothers put a 200p price tag on the shares. Siebe, the engineer, firmed 9p to 1,011.5p after meeting analysts. FKI hardened 3.5p to 153p as Brinson Partners, US fund manager, declared a 3.06 per cent stake.

Cambridge Mineral Resources, traded on AIM slipped 0.5p to 11.5p as it confirmed it could be near a diamond strike in Ireland. On Ofex, Display IT had another lively session; BT man Bill Murphy quit as a director, leaving the shares 25p lower at 240p.