Gatecrasher could spoil cosy Lloyds-TSB get-together

It had to happen - rumours that an outsider plans to barge into the comfortable pounds 13.6bn merger fixed up between Lloyds Bank and the TSB banking group.

Most observers regard the deal as all over bar the shouting. The stock market welcomed the alliance, judging that the long rumoured get-together seemed to make irrefutable commercial sense.

But in some respects TSB shares are riding above the Lloyds bid level with the possible tax advantages to institutional investors distorting the picture. TSB rose 3p to 376p; Lloyds 7p to 786p.

There is little doubt that Lloyds can afford to pay a tempting price for TSB. With the two banks fitting so snugly and the cost savings that should flow from the merger it could make it difficult for a counter-bidder.

Although HSBC, through Midland Bank, is thought to be considering its position, the stock market appears, somewhat surprisingly, to be pinning its faith on a foreign counter.

Any overseas invader would not have the advantages of extensive cost savings and could have difficulty, therefore, justifying paying a higher price than Lloyds.

Commerzbank, which earlier this year took control of the Jupiter Tyndall fund management group, is one name being put forward. The German bank has geared up for expansion and is thought to be keen to make an international splash. TSB represents the last readily available vehicle for a significant entry into UK retail banking, which could prompt the Germans to pay the high price a realistic counter would require.

Eslewhere, flagging consumer confidence - as evidenced by J Sainsbury's results and the profit warning from garage group Evans Halshaw - took their toll. With the reported road building cut-backs adding to the gloom the FT-SE 100 index was at one time down 26.6 points. However, a firm New York opening injected a little optimism and the index ended 10.4 lower at 3,518.7.

A mere 1.5 per cent half time profit increase by Sainsbury, and more evidence of pressure on margins sent a shiver of unease through the sector.

Sainsbury lost 21p to 403p; Asda 2.75p to 99.75p and Tesco 7p to 293p. Argyll, the Safeway chain, finished 10p off at 312p.

The gloomy Mintel survey on high street trading clipped Marks & Spencer 7p to 417p and House of Fraser, the department stores chain, faded 3p to 147p on Morgan Stanley caution.

Evans Halshaw reversed 66p to 318p, Inchcape 15p to 298p and Lex 12p to 318p. Even Cowie, largely a leasing group, felt the impact, off 10p at 287p.

Cordiant, the advertising group, traded near its year's low - down 2p at 84p - as the market awaited details of its signalled cash call to help ease its pounds 150m debt burden. It is suggested the rights price could be around 60p.

Prudential, the insurance giant, jumped 18p to 414p on James Capel support and Legal & General continued to attract attention, edging ahead to yet another peak of 684p. An analyst meeting firmed GRE 2p to 231p.

However, Refuge, the insurer, became the new take over front runner with a 20p gain to 428p. The activity in the insurance sector has become so persistent that many hardened observers are convinced a predator is hovering.

Eurotunnel's failure to win a claim against the British and French railways lowered the shares 5p to 90p.

Berisford fell 5p to a year's low of 145p as worries about the performance of its Magnet kitchens operation gnawed at confidence. The shares hit a 268p high. Norcor, a corrugated board maker, tumbled 12p to 89p on a profit warning.

London Electricity remained dull on the Thames Water brush-off, falling a further 17p to 885p.

Unipalm, the Internet provider, had an eventful session, reflecting the share performance of bidder UUNET and hopes of a counter-offer. The shares at one time showed a 45p gain; they closed 20p higher at 528p in busy trading.

Bluebird, the toys group, was little moved by talk that US toy maker Hasbro had lifted its stake to more than 9 per cent; the price firmed to 354p.

Among the bio babes Cortecs International traded up to 126p with stockbroker Greig Middleton said to be putting a value of 173p on the shares. They closed 6p higher at 118p.

Wembley reacted uneasily to the unexpected "extra time" for the proposed new national stadium, falling 25p to 312p.

Bunzl, the packaging group, edged forward 2p to 203p.