MARKET REPORT: Blue chips boost market cheered by interest rate news

The stock market's rehabilitation continued with the FT-SE 100 index posting a 17.7 points gain, making a 119 plus in the past four trading sessions.

Yesterday's advance had to accommodate dividend payments wiping 8.8 points from Footsie.

Hopes US rates will not be forced higher and the Chancellor will be able to squeeze another base rate reduction provided much of the inspiration.

And major company results were better than expected. HSBC headed the blue-chip performance table with a 48p gain to 1,164p and Pearson achieved a 19p lift to 630p.

In such a relaxed atmosphere it was not difficult to get a takeover story circulating. Zeneca was entrapped yet again. Talk of a SmithKline Beecham strike pushed the shares 32p higher in often brisk trading. They closed at 1,451p, an 18p uplift.

Other drug shares were firm. Celltech added 27p to 535p and British Biotech, following its capitalisation, edged ahead 13.5p to 231p. Glaxo Wellcome managed to shrug off a bearish story about a new rival to its Zantac ulcer drug, firming to 908.5p.

Bass rose 13p to 828p on suggestions it was squeezing Allied Domecq on the price for a half share in the Carlsberg-Tetley brewing operation. Allied shaded 5p to 447p.

Cadbury Schweppes, as the latest round of takeover fever evaporated, fell 10p to 529p. Blenheim, the exhibition group where a bid from United News & Media had seemed imminent, lost 11p to 424p as the market grew restless about the lack of even the merest hint of action.

At the height of the speculation the price touched 458p with talk of a 500p-plus bid in the offing.

Second liners had to contend with a run of disappointing statements. Filtronic, once 507p, tumbled 49p to 196p as US problems cut into profits; Zotefoams, a chemical group, produced another profit warning, falling 41p to 199p and Bluebird, the toys group, lost 33p to 176p as first half profits halved.

Compass, the catering group, slipped to 555p; NatWest Securities take the view the shares are too high and has moved its stance from hold to sell.

Other caterers were still on investment menus following Whitbread's generous valuation of the Pelican restaurant chain. Family-controlled Aberdeen Steak Houses, despite saying it was baffled by its share strength, gained 32p to 70p and PizzaExpress gained 11p to 433p. Meanwhile Whitbread, little changed at 683p, lifted its Pelican stake to 6.4 per cent, buying 850,000 shares at 168p.

Grosvenor Inns was unchanged at 227p as Greig Middleton took a cautious stance. It said the company's record "is poor given the capital raised" and the shares did not merit the sort of rating accorded other managed pub groups.

Essex, the furniture group which has slumped from more than 100p at the start of June, rose 7p to 69p as it said it could not account for the price slide.

Hunting, which has crashed from 231p since April, added 9p to 120p. The shares yield 11.3 per cent. The aviation and oil group, suffered a sharp reverse in its first half-year and the dividend is likely to be cut. Cray Electronics, down to 27p last month, was another to modestly recharged its batteries, up 5.5p to 35.5p.

Costain, the struggling civil engineer, rose 4p to 68p as Kharafi & Sons, the Kuwaiti builder which opposed the recent pounds 74m rescue reconstruction, picked up 1.25 million shares, taking its stake to 25.2 per cent. Last week Kharafi acquired a 5.5 per cent interest.

Pan Andean Resources, seeking oil in Bolivia, gained 10p to a 108p peak. The company refused to comment but there is market talk of a bullish statement soon. It will, among other things, give the date when BHP, the Australian giant working with PAR, will start drilling. It is unlikely BHP would drill unless it was confident of a rich strike.

Waterfall, the nightclub and snooker group, rose 4p to 52p. Stockbroker Butterfield see profits of pounds 600,000 this year and pounds 1.6m next and suggest the shares should be 60p.

London Fiduciary Trust, changing its name to Philippine Gold, is consolidating its shares, trading at around 4.5p, ready for a US listing. It raised pounds 15.5m from an institutional placing.

The company, headed by former test cricketer Phil Edmonds, plans to lift its gold production to 155,000 ounces by the end of the year.

Self Sealing Systems, sold to investors at 54p, fell 10p to 25p as it warned of start up problems with its balloon processing machines.

TAKING STOCK

Emerald Energy held at 2p. Dr. Keith Hewitt, formerly Texaco's man in Colombia, has acquired a 7.5 per cent interest and joined the board. The company is known to be near to clinching deals in Colombia and is expected to give details later this month. Dr Hewitt is consultant to an off shoot of Seven Seas Petroleum which has a Colombian well with an oil flow of 3,400 barrels a day and could produce much more.

Talbex, an aerosol group which crashed into administrative receivership seven years ago, arrived on Ofex. The shares traded at 0.75p. Happy Hotels also made its Ofex debut at 8p.

Odd goings on at Just, a merchandising group. A deal in 666.9 million shares was printed. The price held at 4.25p.