Market Report: Footsie catches festive spirit to surge over 5,900

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SHARES WERE in celebratory mood again, with Footsie scoring a 65.5-point gain to top 5,900 for the first time since July. Hopes of another interest-rate cut in the new year and continuing New York ebullience helped sentiment.

The festive upsurge has taken the index into areas which seemed out of bounds only a few weeks ago. In the past seven trading sessions it has surged 374.4 points, bringing into sight the 6,000 Footsie forecasts common at the start of the year.

Mind you, much of the progress has been achieved on small volume. Many big hitters are away, preparing for their seasonal festivities. There is often a temptation for those left minding the shop to take what they see as precautionary actions which - in the thin trading conditions prevailing - have an exaggerated impact on prices.

Footsie is not far from the 6,179 peak hit in July. Such a display would have appeared laughable when wild rumours of a banking crisis and other bearish influences pressed the market to a year's low of 4,599.2 in October.

For once the rest of the market joined in the romp of the Footsie overlords. The mid cap index rose 34.7 points to 4,798, albeit still a long way off its 5,966.5 peak in June. And the small cap index rose 12.8 to 2,044.4 against its 2,792.7 high.

Tips for the new year - real and rumoured - played a part in the market advance, although suspicions that more big bids would arrive early in 1999 also helped sentiment.

Rentokil Initial, the environment group thought to be itching to make a corporate strike, rose 15.75p to 458.75p, a peak. It is known to have looked at Compass, but the strength of the contract caterer's shares, firm at 679.5p providing a capitalisation of pounds 4.7bn, could make it too big to swallow.

British Petroleum flared 23.5p to 902p. The Amoco merger has still to be cleared, but an announcement is expected shortly. Many tracker funds have presumably increased their shareholdings in anticipation of BP's emergence as Footsie's biggest constituent. But others have, for various reasons, been forced to delay their buying: once the deal goes through they are expected to chase BP.

Marks & Spencer made further headway, up 9.25p to 417.75p. But retail expert Richard Ratner, at a small stockbroking firm, Seymour Pierce Butterfield, moved profit forecasts to a new low - he is shooting for only pounds 760m, cutting by pounds 40m. He said Marks last week experienced poor trading, exacerbating supply problems. The chain's stockpile was growing and many goods will have to be sold at knock-down prices in the new year.

This week SG Securities cut its Marks estimate from pounds 860m to pounds 805m, and Teather & Greenwood went from pounds 860m to pounds 785m. Last week Henderson Crosthwaite moved from pounds 850m to pounds 800m.

Shares of little retailer Cadoro go from bad to worse. The chain, which has admitted trading problems, fell 0.25p to just 0.5p. The shares were 7.5p early this year.

General Electric Co's latest European joint ventures lifted the shares 6p to 543.5p as the cat-and-mouse defence companies alliance game became even more confusing.

There was a spate of bid activity among second liners, with some deals emerging through the rumours. BCH, a vehicle management group, accelerated 28.5p to 246p as Deutsche Bank mounted a 250p cash offer; house builder Banner Homes put on 22p to 140p when a management buyout at 143.5p appeared; and Vision, a digital camera chip maker, added 13p to 58.5p on the STMicroelectronics offer. Car dealer Evans Halshaw rose 5p to 261p following the Pendragon offer.

Goldsmiths, the jeweller, sparkled 52p to 164p after what it described as a "very preliminary" approach, and Moss Bros smartened 16.5p to 150p on rumours of an Arcadia strike.

Marston Thompson & Evershed, the brewer, fell 8p to 287.5p once it became clear that Greene King, the East Anglian brewer, would not take on the white knight role. Greene King has agreed with hostile bidder Wolverhampton & Dudley Breweries to buy 170 Marston pubs for pounds 80m if its offer goes through. Marston has bitterly resisted Wolves' pounds 262m offer, but it now looks as though it may have to capitulate if Wolves can find the cash to top up its offer.

IT recruitment group MSB International continued its remarkable run following an upbeat trading statement, gaining 32.5p to 282.5p. ISA International jumped 8p to 42p as director David Heap took his stake to 22.1 per cent, and John Foster, giving up textiles to concentrate on property, fell 3.25p to 6.75p.

Tepnel Life Sciences softened 1.5p to 13.5p following the surprise departure of chief executive Simon Douglas.

Derby, a building materials group, fell 10p to 33.5p on a profits warning, and William Nash's failure to hang on to a key German contract left the shares 12.5p off at 142.5p.

SEAQ VOLUME: 477 million


GILTS INDEX: 115.5 +0.55

CELEBRATED, running the Chili's restaurants, could be in profit this year, says broker Beeson Gregory.

The company reported a half-year pounds 666,000 loss, but analyst Ian Berry sees profits of pounds 200,000 for the year to March. The Chili's chain is being extended to five and the Starvin Marvin restaurants turned round. The shares are 6.75p against 21p two years ago.

LAST WEEK'S unsolicited and rejected bid for Avon Rubber - flat at 555p - may have led a major group to take a look at the maker of parts largely for the automotive industry.

The shares have bounced back from their low of 394p, but the group's impressive record, with profits hitting pounds 26.4m last year, is likely to be deflated: profits of about pounds 24m are expected.