Insurers sparkle as the Footsie smashes 3,600 barrier

MARKET REPORT

Blue chips soared to a new peak with the FT-SE 100 index crashing through the 3,600 barrier for the first time.

Growing hopes of an interest rate cut, the sharp inflation improvement and increasing confidence about the Budget created the excitement.

And, seemingly inevitably, New York made a significant contribution. Yet more records as the Dow Jones Average marched remorselessly towards 5,000 points inspired London, although the gap between the two markets yawned even wider.

The FT-SE 100 index ended 39.4 points higher at 3,610.8 with double-figure gains spread through the top 100 shares. Government stocks offered support with the benchmark gilt, due 2017, over pounds 1 higher.

It is, however, very much a blue-chip share party. Although the index measuring the next 250 shares was sharply higher it is short of its record.

The two indices clearly demonstrate how the current party has divided the stock market, with blue chips enjoying a boom but others having a much more subdued time.

The FT-SE 250 index, at 3,960.8, is nearly 200 points below its peak, established when blue chips and second-liners were advancing in unison in February last year. Then the two indices reached record levels together.

Insurances were the outstanding performers with Legal & General's decision to shake up its long-term funds sparking the enthusiasm.

The move, which should increase dividend growth, is likely to be followed by other insurers. L&G jumped 22p to 667p and Prudential Corporation, the day's best-performing blue chip, 20p to 415p. Sun Alliance improved 14p to 371p and Royal Insurance 13p to 380p.

The market was quick to take the view that the L&G move was not unrelated to the bid speculation that has swirled around the group. There is a strong belief the insurers are due for bid action. If not L&G, the market believes Royal will be the target.

It is surprising the industry has managed to avoid the flood of financial bids that has engulfed merchant and retail banks and fund managers.

Zeneca continued to suffer the torment of takeover rumours, surging to another peak. Roche and Ciba-Ceigy, the Swiss duo, were replaced as bid favourites by another Swiss group, Sandoz. It has, it was said, signalled it intended to make a big buy although a few months ago it seemed to rule itself out of the Zeneca running. Zeneca finished up 22.5p at 1,313p. Glaxo Wellcome gained 23p to 888p. It intends to appeal against last week's legal judgment that the Inland Revenue can pursue the group for back tax.

The scent of lower interest rates captivated builders and retailers. Barratt Developments, expecting to "comfortably" exceed last year's house sales, rose 5p to 218p and Beazer 4p to 167p.

BICC gained 12p to 265p, a two-day advance of 21p. The shares have been bumping along around their year's low and there are suggestions the group is vulnerable to a lurking predator.

Among stores, Storehouse, figures next week, rose 9p to 320p and Kingfisher 14p to 514p. Shell, up 11p to 769p, was spurred by an investment presentation, with its Nigerian involvement again brushed aside.

United News & Media, awaiting disposal developments, jumped 31p to 570p. Other newspaper shares were firm ahead of the Times price increase. Mirror Group Newspapers gained 13p to 180p and the Telegraph 19p to 428p.

Cowie, the garage and leasing group, motored on the back of Merrill Lynch support, advancing 16p to 292p. Rolls-Royce, with another contract under its belt, topped its 1987 flotation price, rising 3p to 170.5p. Figures left Cable and Wireless 2p higher at 425p.

Inchape weakened again on currency worries, off 11p at 295p; Vodafone remained under pressure from cash-call worries, falling 3.5p to 252p, and BT brushed its year's low, falling 2p to 362.5p on competition worries.

Euro Disney fell 25p to 169p on further consideration of its modest profit and First Choice firmed to 60p after reporting a 72.1 per cent rights take-up. Premier Land had to be content with a paltry 17.1 per cent rights response. The shares held at 4.25p.

CE Heath, confirmed its computer flotation plans but fell 5p to 163p on figures. Unipalm jumped 57p to 755p as the value of the US bid continued to increase.

A Beckman, the textile business, held at 59p. The move to take the company private at 60p a share was approved.