Heavy Ladbroke trading prompts speculation of corporate activity : MARKET REPORT

The FT-SE 100 index gained 3.6 points to 3,074.9 but the supporting FT-SE 250 index lost 8.8 to 3,453.2. Turnover was 603.3 million shares with 22,992 bargains. Government stocks were strong.

Ladbroke, the betting and hotel group, had a fascinating run, prompting speculation that corporate activity is imminent.

The shares edged ahead 1.5p to 178p in busy trading. Kleinwort Benson was believed to have tried to pick up 8 million at 180p and another 6 million went through at 182p. With Smith New Court thought to be active on Tuesday, the market's sixth sense was alerted.

Under new management, Ladbroke has been tidying up its sprawling operations and last month realised nearly £300m selling its struggling Texas do-it- yourself chain to J Sainsbury.

Ladbroke appears to be keen to concentrate on its betting and Hilton hotels businesses.

In some quarters the sale of Texas was interpreted as part of a possible move to expand the hotel side.

It runs the international Hilton hotels spread and is thought to be considering whether it has the muscle to bid for all - or part of - the unrelated US Hilton Hotels company, which has said it is open to offers.

Such a move would represent a big swallow for Ladbroke; perhaps too big. But it knows the US Hilton sale could be the only chance it will ever enjoy to embrace the Hilton chain worldwide. The possible economies and certain prestige of running the two sides of Hilton could tempt it to stretch its resources.

American investors came to the rescue of the rest of the market, dragging shares out of the doldrums. For much of the session the market had looked decidedly dispirited as the latest batch of Whitehall statistics seemed to question the Government's economic policy and hinder its room for manoeuvre.

With the Dow Jones Average soaring to a new peak - underlining the growing gap between London and New York - early falls were eliminated and the FT-SE 100 index ended with a 3.6-point gain to 3,074.9.

Government stocks were encouraged by overseas bond markets, gaining nearly a point.

New York's record-breaking display, the sudden strength of gilts and the impression that the poor Whitehall data has at least reduced the scope for interest rate increases could, some were arguing last night, pull the market out of its recent lethargy.

Budgens, the struggling supermarket chain, attracted attention, jumping 4p to 35p. There was talk that a deal with the Co-op was planned. It was unclear whether the Co-op retail arm intended to use Budgens as a vehicle for a share quote or was planning to sell some of its outlets to the supermarket chain.

Last year Hobsons, then a little toiletry group, splashed out £100m buying the Co-op's food division with the cash raised through the market. It could be that Budgens plans a similar cash-raising exercise.

Any deal, however, would have to overcome any reluctance of Rewe, the German food retailer. The Germans, owners of nearly 30 per cent of Budgens, have expressed their disappointment with the decision to abandon the Penny Market retail concept and are thought to be trying to place their stake.

Financials were back in the bid spotlight with Kleinwort at one time up 19p at 654p and ending at 639p. SG Warburg gained 19p to 729p.

Sales projections from Wellcome lifted the shares 8p to 1,023p; bidder Glaxo was little changed at 643p.

After the excitement of the Northern Electric clearance electricities succumbed to profit-taking although Northern managed a 2p gain to 1,093p. The generators remained weak ahead of more pricing details. National Power fell 3.5p to 469p and PowerGen 4p to 493p.

British Vita, the chemical group, slipped 2p to 222p in busy turnover. Kleinwort was said to have picked up 2 million shares. Berisford tumbled 11.5p to 230.5p as its convertible rights issue flopped, attracting a 54 per cent take-up. Underwriters took up some stock; the rest was placed by Hoare Govett at 96.5p.

Casket fell 2p to 14.5p after touching 11p. It said it expected to produce a "modest" profit in the year to March against market hopes of about £2.5m.

Brewers staged a modest recovery from last week's Office of Fair Trading investigation into beer prices. The two groups leading the chase for Courage made headway. Scottish & Newcastle rose 6p to 506p and Whitbread 7p to 541p.

Parkdean, the caravan group, soared 33p to 172p following the bid from Vardon, the aggressive leisure group.

Allied Leisure, seen as a bid target, held at 23p. Williams de Broe expects the revitalised ten-pin bowling business to produce profits of £1.7m this year and £2m next. Hopes of a deal between Renwick, the South African group, and the Newington family over Fairline Boats lifted it 3p to 424p.

Filtronic Comtek, a maker of mobile telephone equipment, continued to move ahead, gaining 13p to 224p.

Building and building material shares were dull but Norcros encountered a smattering of buying with vague talk of takeover action. The shares rose 5p to 97p.

European Colour, the chemical colour group, is paying £4.3m for what is, in effect, a list of customers from the Ciba-Geigy giant. The deal should quickly enhance EC's profits. It should produce £1.8m in the year to end March and could hit £3m next. The takeover will be financed by a three-for-11 rights at 57p; the shares rose 5.5p to 75p.

Smith New Court has pulled back its expectations for Kenwood, the kitchen appliance group. It is now looking for £13m in the year to the end of next month and £16m in the following year. The shares fell 2p to 266p, just above their 12-month low. They touched 385p last year. Kenwood, a spin-off from Thorn EMI, was floated at 285p three years ago.