Market Report: Electricities and drugs generate bid excitement

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BLUE chips closed at their highest for five months with drugs and electricities making much of the running.

The FT-SE 100 index was back above 3,200 points, achieving a 30.1 gain to 3,205.2. An element of panic in the futures market, with one speculator rushing to close a short position, provided a late fillip.

The stock market looked confident from the opening bell. It strengthened as the day progressed in often lively trading with New York's sudden rebound underlining the belief that the dog days of 1994 have ended and shares have started the expected second-half recovery.

Takeover speculation remained in the air, heightened by a Hoare Govett prediction of increased activity in the next 12 months.

The recent run of encouraging Whitehall economic figures and the comfortable absorption of the US interest-rate increase have contributed to the improvement in sentiment. Any British rate rise is seen as some months away and could yet be rendered unnecessary if, as many expect, the Germans cut their rates soon.

Electricities again generated excitement, continuing the surge started by the lenient curbs from the industry watchdog, Professor Stephen Littlechild. Takeover talk helped; so did Seeboard's 2 million share buy-back at 425p. The company has authority to buy in another 23.7 million shares.

Seeboard gained 17p to 437p; Eastern, which completed a 13.5 million buy-back in April, rose 20p to 822p.

Many are taking the view that bid action will develop in the sector in the next few months. The electricities are seen as ideal targets for cash-hungry industrial groups. There will be a tendency to get deals completed, it is argued, well before the possible arrival of a Labour government.

Drugs were in the bid limelight with Zeneca, up 17p at 848p, singled out by Panmure Gordon as the most likely to collect a bid. Wellcome, clashing with SmithKline Beecham over patents, gained 11p to 720p and Glaxo 7.5p to 652.5p.

Oils were firm. British Petroleum rose 6p to 412p and Shell, helped by talk of a dividend increase, 11p to 729p.

Drinks, with the summery weather making an increasing impact, were firm. But there were contrasting displays by breweries facing shareholders today. Greene King frothed up 13p to 519p but Scottish & Newcastle remained flat at 534p, down 3p.

Allied-Lyons jumped 14p to 620p with rumours of a buyer seeking 30 million shares causing the stir. Guinness, as rumours continued that the US investor Warren Buffet had sharply reduced his holding, rose 9p to 483p.

Macallan Glenlivet, the Scotch whisky group, again drew strength from a NatWest Securities visit, up 11p to 203p.

Asda led supermarkets higher, up 2.5p at 66.5p with Seaq putting volume at 29 million. Talk of a profit upgrade helped.

Body Shop International gave up a further 8p to 219p as controversy over its operations raged in the ethical investment sector. Upton & Southern, seeking to raise cash, held at 9.5p.

Aegis, the media buyer, edged forward 1p to 31.5p on the appointment of Crispin Davis, who quit Guinness last year, as chief executive. Sutcliffe Speakman, the steel products group, fell 7p (after 12p) to 40p as Richard Mumford, managing director, departed.

Fine Decor, a wallcovering group that lost its finance director in June, dropped 22p to 223p following an agency cross of 540,000 shares at 221p. The shares were floated last summer at 210p.

Canadian Pizza, figures soon, jumped 13p to 106p. The shares were sold at 200p late last year but crashed on a profit warning in April. The market expects about pounds 3m against earlier hopes of pounds 4m.

Midland Assets, running nursing homes, rose 1p to 18p on talk of an acquisition.

The FT-SE 100 index broke through 3,200 points, closing 30.1 higher at 3,205.2; the supporting FT-SE 250 index gained 8.7 to 3,762.1. Turnover was just over 700 million shares with 29,394 bargains. Govenment stocks recovered early falls.

IMC Industries, with soft drink and video interests, returns to the market today following the pounds 11.5m swallow of Red Mill Snack Foods. The deal trebled IMC's capital with its shares valued at 2p for the deal. They are expected to trade around 2.5p, the suspension price. IMC, which plans to change its name to Continental Foods, has moved from USM to full listing.

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