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Market Report: BG and Centrica turn on the gas to reach fresh highs

BG was in rampant form once again. Talk of another share buy back and continuing speculation one of the oil giants plans a take over strike, spurred the shares 13.5p to a 319p peak.

As British Gas it had the dubious distinction of being the stock market's most derided blue chip. But since the bleak days when Cedric the pig was paraded as shareholders attended their yearly meeting, the group has been transformed and is now largely an oil and gas explorer and producer.

It has already astonished observers with a pounds 1.3bn share buy back. The subsequent disposal programme is thought to be running ahead of schedule and may pull in as much as pounds 1.5bn by the middle of the year. BG would be tempted to return such obvious wealth to its shareholders.

Its old stable mate, Centrica, is also enjoying a boom. The gas supply operation, split from BG nearly a year ago, was another in record breaking mode with a 7p gain to 103p. Many look for the shares to reach 125p in the next few weeks.

Although the Far Eastern crisis has failed to create the market dismay many expected there is, nevertheless, a growing appreciation of domestic groups which have little or no Asian exposure. Centrica features high in any stay-at-home portfolio.

At the time of the split BG was around 150p; Centrica, helped by bid hopes, floated at 70p before falling to 56.25p in May.

Blue chips dominated the action with Footsie up 58.9 points to 5,165.8. The rest of the pack was in a more subdued mood.

Dresdner Kleinwort Benson comments lifted Sun Life & Provincial 29p to 499p and Merrill Lynch inspired Orange 14.5p to 267.5p.

Much of the take over speculation centred on Inchcape and Somerfield. The international trader, savaged by currency movements and then the turmoil in the Tiger economies, gained 12.5p to 155.5p. A dead cat bounce - or corporate activity? The market seemed evenly divided. The speculative hopes appeared to be pinned on a US predator although there was talk of a break up.

Somerfield, the supermarket chain, lost some of its momentum although it ended above its low at 248.5p, off 2.5p. The revival was due to US buying. The market is now content to rule out a major British group emerging as a bidder and is now looking towards a Continental discounter such as Lidl.

Holidays group Airtours, which has announced a two-for-one share bonus, shaded 7.5p to 1327.5p as bid fever cooled.

The latest round of retail trading statements was largely disappointing. Laura Ashley tumbled 8.5p to 26p; La Senza 2.5p to 19p and House of Fraser 16p to 203.5p. Argos, reporting tomorrow, lost 33p to 505p. Dixons remained depressed after Wednesday's disappointing sales update, giving up a further 19p at 505p.

Cadbury Schweppes' new US distribution and manufacturing deal with Coca- Cola provided further sparkle, up 14p to 699p. NatWest said buy; UBS suggested selling.

General Electric Co. held at 391p. Its pounds 300m share buy back was completed with the purchase of 4 million shares at 390.5p.

Imperial Chemical Industries rose 25p to 955p following an analysts meeting and engineer IMI, once part of ICI, fell 7.5p to 413.5p on rumoured Schroders caution.

BTR continued to find new lows, off a further 3.25p at 165.75p.

Financials made more headway. Barclays was again prominent with a 49p gain to 1,707p; Woolwich put on 10p to 334p.

The encouraging casino and hotel results from Stakis, up 7.5p to 98.5p, inspired Ladbroke to a 15.5p gain at 292.5p.

Superscape VR hardened to 113p after a presentation at Henderson Crosthwaite for its 3D Lego-on-screen development.

EW Fact, the educational group, held at 67p. It duly confirmed it was in talks with a possible bidder but warned profits would not be up to scratch. BPP, the market's favourite to strike, said it was not involved in talks with EWF. It has a 3.57 per cent stake.

Xenova climbed 27p to 172p following an alliance with the Institute of Grassland and Environmental Research to isolate plant chemicals which could be used in the treatment of diseases. The shares touched 435p last year.

Profit warnings took their toll. Portmeirion Potteries cracked 53p to 240p; Global, hit by the ban on beer off the bone and the Indonesian crisis, lost 3.5p to 9.75p.