Market Report: Battered Footsie struggles back

THE BATTERED and bruised stock market struggled off its knees with the Lloyds TSB banking group providing a rare example of blue-chip excitement.

Footsie was at one time up 118 points, closing 55.5 higher at 5,455. It was yet another ridiculous calculation: only seconds before trading ended the index was nursing an 82 gain. Then a number of maverick trades were punched in.

BG was suddenly 30.5p lower at 340p following late deals at 340p and 342p. The spread on the order book was 340p to 366.5p. Most of the trades just ahead of the two mysterious inputs were around the 355p/358p level.

Abbey National was another casualty. The last order book trade, for 8,740 shares, was at 1,006p. Although the final trade, which was off the order book, was at 1,060p, the shares ended 89p down at 1,006p. Another former building society, Woolwich, seemed to be the subject of a miscue above the ruling price. The last order book trade was 343p against around 320p/325p. Clearly the final Footsie calculation should be revised.

Lloyds, up 51.5p to 755p, was the subject of an array of rumours. Since its interim results three weeks ago there has been growing speculation chairman Sir Brian Pitman is nursing a major corporate excursion.

Imaginations are running riot. A merger with HSBC, the old Hong Kong & Shanghai Banking Corporation which owns Midland Bank, is one suggestion. Standard Chartered, once a Lloyds target, is another thought to be in the line of fire. And recurring rumours of strikes at former and existing building societies and an array of insurance companies are going the rounds.

Lloyds has made no secret of its desire to grow. And Sir Brian has said: "Nothing would be beyond us. We are one of the biggest banks in the world".

Credit Lyonnais added to the excitement by examining the rationale of a Lloyds/HSBC merger and even raised the possibility that Lloyds, if it cannot agree a deal, could go hostile with a 1,600p a share bid.

HSBC, which has suffered because of its Asian exposure, put on 66p to 1,326p. Besides the Lloyds speculation, HSBC was buoyed by a Morgan Stanley target price of 2,000p and an overnight recovery in Hong Kong, where share buying by, in effect, the Chinese government prompted an 8.5 per cent gain.

The banking excitement extended to Bank of Scotland, up 20.5p to 615p.

The Hong Kong comeback also contributed to Footsie's progress. With Moscow staging a rally and other overseas markets looking more benign, shares were in a mood for progress from the opening bell. Bargain hunters were evident, particularly in early trading.

British Petroleum, still drawing analytical support for its Amoco take over, rose 52p to 854p and Enterprise Oil, on talk it could be prompted into bid action, flared 31p to 449p.

Rumours of corporate action at hard pressed BTR, the conglomerate seeking to become a focused engineer, sent the shares ahead a further 7.75p to 165p. Kohlberg Kravis & Roberts, the US break up specialist, is the name in the frame with conjecture it will mount a full bid or settle for a significant stake.

J Sainsbury improved 15.5p to 519.5p. Switching out of Tesco, the subject of a series of modest profit downgrades, and Asda, expected to be cut by ABN Amro, was behind the gain.

Henlys' expected higher bid for Dennis created more activity on the vehicles pitch. Dennis accelerated 47p to 508.5p and Henlys, where Volvo is buying and has so far put together a 3.3 per cent stake, fell 52.5p to 512.5p. Mayflower Corporation, which has made a 450p cash offer for Dennis, held at 177p.

Debenhams, the department stores chain, hardened 7.5p to 324.5p as Dresdner Kleinwort Benson lifted this year's profits forecast pounds 3m to pounds 135m and next from pounds 142m to pounds 147m.

Cammell Laird, the engineer with a major deal in its sights, jumped 65p to 625p and glass maker Pilkington pulled out of its dive, recovering 7.5p to 89.5p. Waverley Mining, three years ago riding at 132p, fell 1.75p to 8p. On Thursday it became clear takeover talks had collapsed. Azlan, the computer group which is considering whether to make a trading statement, lost 2p to 54.5p. The shares suffered after a profits warning from Datrontech.