Market Report: Footsie breaks into stampede

FOOTSIE SCORED its second-highest one-day gain in the second-busiest trading session on record. With institutional investors, domestic and foreign, chasing shares with what appeared to be a grim determination, the blue chip index burst through the 6,100 barrier, soaring 190.6 points to 6,148.8. It is now just 30.2 below the peak achieved in July last year.

The new year stampede was fuelled in part by New York's strength, with the Dow Jones Average hitting a high during London trading. Other world markets were in form, with the successful launch of the euro one of the factors behind their progress.

Turnover nudged 1.5 billion shares. It was swollen towards the close when, in what appeared to be a bought deal, 253.76 million Telewest Communication shares went through at 175.25p.

Suddenly, it seemed that institutions, sidelined last month by the festive season and the run-up to the euro, were awash with cash. If they were unable to buy into any of the currently fashionable Footsie areas, such as drugs and telecoms, they were content to alight on any blue chip so long as the asking price was not too outrageous.

Such was the clamour that even some of the long-neglected second-liners found themselves in demand. The mid cap index jumped 74.2 to 4,944.4 and the small cap 20.3 to 2,110. Mind you, the market's under-card remains a long way from the halcyon days when the second and third-liners were really in demand. The mid cap index hit a 5,966.6 record in June last year and small cap peaked at 2,792.7 in May.

Footsie, however, displayed no inhibitions. It has been growing steadily stronger since sinking below 5,000 in October. The progress has accelerated in recent weeks, and after a subdued start on Monday the index has climbed more than 250 on the opening trading days of the year.

New year rallies are not unusual. But the rampant buying which has characterised the latest burst of excitement suggests that even more cash is sloshing around the system than many suspected.

The rush to indulge in share buy-backs in the past few years has reduced the pool of shares available and, of course, increased the wall of money.

There are indications that more Continental fund managers see London as an attractive home for their cash, and it is also suggested US fund managers, who parked cash in London ahead of the euro, have decided to invest at least part of their money in London rather than on the Continent.

Many market men, however, wonder whether some fund managers have lost their marbles. They point to some of the huge price movements and their herd instinct.

The computerised order book has increased share volatility. Perhaps it is responsible for some of the exaggerated movements but a 13.6 per cent gain, as Standard Chartered enjoyed, looks unrealistic when compared with the more modest movements which would occur not so many years ago.

Standard jumped 94p to 784p, with nearly 7 million shares traded. Bid talk was again in the air.

Suggestions of corporate activity, as well as hopes of lower interest rates today, were a major influence elsewhere. There are still expectations of more deals among defence, drugs and telecom shares.

The telecom activity was highlighted by the Telewest deal. It seems that Dresdner Kleinwort Benson picked up the shares from US group Cox Communications, which had around 12 per cent. DKB arranged to place the shares with institutions at 181p.

Colt Telecom, with talks of a bid swirling around, hit another peak, up 87.5p to 1,124.5p, and BT moved through 1,000p to reach 1,011.5p. Vodafone shaded to 1,089p as arbitrageurs, invariably active in transatlantic bids, took positions and analysts pondered the probability that Voders will have to contend with competition to win control of AirTouch Communications.

Reuters, supported by Warburg Dillon Read, gained 58.5p to 730.5p, but Dixons, downgraded by DKB ahead of next week's interim figures, missed the fun, falling 40.5p to 797.5p.

Still Next's encouraging trading statement produced some relief for retailers. The fashion chain rose 48.75p to 562.25p, and Marks & Spencer 11p to 419.5p.

LucasVarity's confirmation that it was in takeover talks gave the shares an 11.25p boost to 226.5p. Engineer BWI, the latest management buyout candidate, jumped 22p to 69.5p, and Avonside, a house builder, put on 10p at 50p as a potential bidder hovered.

Hopes of a higher offer from Wolverhampton & Dudley Breweries lifted Marston Thompson & Evershed, the Pedigree brewer, 8p to 197.5p.

The collapse of talks at Allied Carpets cut the shares 7p to 41p.

SEAQ VOLUME: 1.47 billion

SEAQ TRADES: 83,372

GILTS INDEX: 116.15 -0.10

A LEISURE merger is in the air. European Leisure, the disco group, firmed to 72p on vague talk of a bid, possibly from Allied Leisure, unchanged at 25p. The shares of both have been caught in the leisure share fallout. There are also suggestions that Allied will buy European's 23.9 per cent stake in Waterfall, a snooker and bowling group, and then bid for the rest. Waterfall shares rose 3.5p to 64p.

HOUSE OF FRASER, the department store chain, looks vulnerable to a bid. There is talk it is having discussions with a possible predator. The shares firmed 2.5p to 57.5p in busy trading. They came to market at 180p in 1994 and have been as high as 228.5p. A trading statement is due shortly and there is speculation it could be accompanied by confirmation of the predator's interest.