Market Report: Blue chips in short supply as Footsie surges

FOOTSIE ACHIEVED its fifth consecutive gain, stretching to its highest since the end of July.

Conditions were decidedly squeezy, with a blue chip stock shortage exaggerating many movements amid signs of end-of-year window-dressing.

Fund-to-fund bed and breakfast deals and the purchase of 236.6 million Ibstock shares by CRH ballooned the day's volume to an unrepresentative 933.3 million.

Many major institutions are deliberately sitting on the sidelines in the run up to the launch of the euro. But the pending arrival of the controversial currency is thought to have provoked some defensive buying, particularly from overseas.

Footsie surged 134.6 points to 5,876.5. Mid cap shares were relatively strong, gaining 31.7 to 4,742.9 but the poor old small caps could manage only a 6.5 gain to 2,022.5.

Two still-speculative takeover situations absorbed much of the interest.

Wal-Mart's European ambitions continued to create excitement among possible targets, and the signalled British Aerospace merger with DaimlerChrysler and/or General Electric Co - or perhaps even a three-way tie-up - kept some players on their toes.

Ever since Wal-Mart, the huge US pile-it-high retailer, let it slip it wanted to expand in Europe the stock market has done its best to provide a target.

Asda, the superstores chain, is its favourite but MFI, the hard-pressed furniture retailer, and even J Sainsbury have been cited as candidates for Wal-Mart's attentions.

Asda, which said last week it had not had discussions with the US group, gained 6.75p to 159p, and MFI added 4.25p to 32p. J Sainsbury was lifted 5p to 469.5p.

Most observers believe the loss-making MFI's stores are too small to attract Wal-Mart. But Asda, which also scored from favourable comments from Dresdner Kleinwort Benson and HSBC, and Sainsbury are much nearer the Wal-Mart pattern.

BAe rose 21.5p to 531p. It has been talking to the German DaimlerChrysler group for months and seemed near to clinching a deal. Then General Electric Co, up 27.5p at 556p, tossed its not inconsiderable hat into the ring. Now there are suggestions that the longstanding BAe/GEC merger has again been wheeled out and dusted down, or that GEC's defence operations will be injected into BAe. With the arrival of GEC the Germans are becoming increasingly unhappy about what they see as BAe's dithering.

Financials had a strong day, with Prudential Corporation 41.5p higher at 956.5p and Barclays 64p at 1,337p.

Reed International continued to benefit from rumours of a Microsoft deal with its Dutch relations, Elsevier, and added 27.25p to 491.25p. EMI, the showbiz group, and telecom groups such as Vodafone were pushed higher on talk of festive sales.

Dixons, one retailer said to be experiencing a Christmas sales rush and also enjoying its image as an Internet play, rose 37p to a 792p peak as it celebrated its return to Footsie. Imperial Tobacco, also on its return, rose 10p to 655p but Hanson and Gallaher, the other recruits. gave ground.

British Airways climbed 22.5p to 391p, ahead of an investment conference expected to be given by the chief executive, Robert Ayling, in the new year.

Marks & Spencer fell 2.25p to 396.75p as SG Securities cut estimates from pounds 860m to pounds 805m and from pounds 910m to pounds 885m. Charterhouse Tilney softened its Cadbury Schweppes figures from pounds 618m to pounds 600m and from pounds 690m to pounds 660m. The shares rose 10p to 1,019p

There was, once again, a raft of takeover announcements on the under- card. After the market closed came the Ibstock bid. CHR, the Irish group, said it had 50.7 per cent of the brickmaker, up 0.5p at 57p, and would bid 70p a share of the rest.

Nightfreight accelerated 6p to 25.5p on hopes of a bid from Jacobs, which has bought an as yet undisclosed stake, and the printer Wace at last collected a bid, an all-share affair from Photobition, which it promptly rejected. Wace gained 10.5p to 51p and Photobition was little changed at 239p.

Jarvis Porter, the beer mats group, jumped 19.5p to 98.5p on a bid approach, and the on-off management buyout at Ushers of Trowbridge, the brewer, is on again, pushing the shares 13p higher at 110.5p.

But Dagenham Motors reversed 16p to 151.5p as its signalled bid materialised at only 160p a share.

Profit warnings provided a chill touch to the festive cheer. Gremlin, a computer games maker, slumped 34p to 91.5p; the clothing group Dawson International's latest gloom shot left the shares 2.5p off at 10p. They were once 159p.

Villiers, an engineer expected to announce a significant acquisition, hardened 0.5p to 9p, and MSB International, an IT recruitment group, continued to soar on its upbeat trading statement, gaining a further 44.5p to 249.5p.

The appointment of June de Moller, retiring managing director of Carlton Communications, to the board of Lynx, a computer group, was enough for a 15.5p gain to 181p.

SEAQ VOLUME: 933.3m

SEAQ TRADES: 56,922

GILTS INDEX:

DELPHI IS believed to be near to completing two disposals - unloading its troublesome US offshoot, Alpine, for pounds 17m and selling its 30.8 per cent stake in the French group Decan for some pounds 28m. Shares of the IT recruitment group rose 22.5p to 292.5p in brisk trading on hopes that the deals will leave the company cash-positive The shares have crashed from 827.5p earlier this year and topped the 900p mark two years ago.

UNITED CARRIERS, the road transport group which has slid from 80p to 9p in the past year, climbed 4.5p to 20p as Luke Johnson, the entrepreneurial investor, emerged as a 7.1 per cent shareholder. His main claim to fame is the creation of PizzaExpress as a quoted company. Mr Johnson is attempting to repeat the exercise through the Belgo restaurant chain, which embraces such London eateries as the Ivy and Le Caprice.