Market Report: Hanson gives strong base for FTSE rally

HANSON PROVIDED a solid foundation for a strong rally in the FTSE 100 yesterday, as dealers prepared for a positive trading update from the former conglomerate.

The building materials group, risen from the ashes of Lord Hanson's sprawling empire, cemented a 35p increase to 621.5p ahead of a major European roadshow.

The market believes that the company will this week delight continental investors with a raft of bullish news. The focus will be on the US, where Hanson derives around half of its pounds 1.8bn turnover. Over the next five years, demand for the group's products will be boosted by a multi-billion dollar roadbuilding programme funded by the US government.

Hanson is expected to tell European fund managers that it is ideally- placed to take advantage of the road bonanza, having bought several small building materials businesses in the US in recent times.

Other bolt-on buys could be on the cards. Hanson's field day was completed by speculation that it might bid 200p per share for Alexander Russell, up 40p to 167.5p. The tiny building materials business was in takeover talks with RMC, which owns a 25 per cent stake, but the discussions foundered after a disagreement on price.

The FTSE 100 had an odd day, finishing sharply higher on thin volume. The blue-chip index closed 75.6 higher at 6,503.6, within a whisker of its all-time high, but the rise was confined to a few chosen stocks. The mid-cap was in subdued mood, scraping a 4.1 rise to 5,788.6. The small cap fared better ending 11.7 up to 2,533.9, another record for the year.

Telecoms were again all the rage among blue chips. Cable & Wireless soared 67p to 909p after selling its undersea cable business for a good price. Rumours of a merger with France Telecom and of a sale of One2One continued to circulate. Orange dialled a 3p advance to 844p on whispers that the German giants Deutsche Telekom and Mannesmann could bid if they fail to buy One2One. Telewest Communications remained in the consolidation loop, putting on 14.5p to 297.25p. Colt Telecom followed the pack, reaping a 44p reward to 1,146p.

BT was boosted by its investment in Japan Telecom. The deal, in partnership with AT&T, was well received, sending the shares 53p higher to 1,047p. The broker CSFB helped with positive noises on BT's residential and Internet revenues.

In a related sector, Flextech, the broadcast group, beamed 35p higher to a five-year high of 851p after Investec Henderson Croswaithe increased its share price target by a whopping 27 per cent to 905p. Analyst Mathew Horsman likes the group's interactive shopping prospects and anticipates an important deal in digital television.

The Internet worked its magic on a couple of stocks. GEC logged on a 29.5p rise to 608.5p - a five-year peak - after consummating its long- awaited multi-billion pound deal. It bought the US Internet communications equipment group Fore for a mere $4.5bn.

WH Smith, the newsagent, finally announced details of its free web access and delivered a 38p rise to 778.5p.

Banking stocks were excited by the Bradford & Bingley vote to scrap its mutual status. The rumour mill started churning out names of potential bidders. Lloyds TSB, up 14p to 981p, and NatWest, 38p higher at 1,503, were mentioned.

Tesco took a battering, shedding 5p to 190.75p as worries over another price war prompted a downgrade from Morgan Stanley. Marks & Spencer lost another 6p to 448.25p as the Warren Buffet stake remained pie in the sky. Reckitt & Colman, the Harpic maker, slipped 14p to 717.5p on fears that one of its biggest shareholders may be looking for an exit. The fund manager Capital yesterday sold nearly 2 per cent of Reckitt, keeping just over 10 per cent.

Arriva, the transport group, was rocked by last week's bearish trading statement. It crashed 28.5p to 386.5p amid wild rumours that old accounts will have to be looked at again.

Bid rumours swept the undercard. Ultraframe, a maker of conservatory roofs, reached for the sky, rising 18p to an all-time high of 415.5p. There is some talk of a strike from cash-rich Hepworth, down 1p to 191.5p. Hepworth is also said to be looking at overseas building materials producers.

Takeover favourite Cox Insurance rose 10.5p to 200.5p in tandem with insurance brokers Lambert Fenchurch. Their bigger rival, Jardine Lloyd Thompson, down 5p to 226.5p, is rumoured to have had a look. The advertising group Maiden rose 26.5p to 404p on talk of a bid from Carlton, up 3p to 630p.

First Leisure flexed its muscles and went 4.5p higher to 254.5p after confirming talks over an all-share merger of its fitness unit with Cannons, down 3p to 193.5p. The talks could flush out a counterbid from Whitbread, down 15p to 1,032.5p and still said to be looking at Grenalls, or Bass, up 22.5p to 952.5p. The real estate group Greycoat developed a 4p rise to 237p after confirming The Independent's story of a management buy-out funded by Mercury Asset Management.

The collapse of bid talks, probably with Spain's NH Hotels, unsettled Jarvis Hotels, which lost 20p to139p. Bula Resources, an Irish oil minnow, firmed 0.25p to 1.25p on rumours that a large Lybian deal is near. BATM, the information technology group, buzzed 63p higher to 585p after good results and rumours that a computer giant, possibly 3Com, IBM or Cisco, is building a 4.5 per cent stake.

SEAQ VOLUME: 899.3 million

SEAQ TRADES: 77,795

GILTS: 110.79 -0.24

LINDEN, a tiny housebuilder, was in demand yesterday amid talk that a large development is about to be given the go-ahead.

The shares built a 15.5p rise to an all-time high of 226p on whispers that the group is soon to be granted planning permission to develop a 56-acre site.

The development, which should include houses and some retail space, could add over pounds 20m to the group's book value.

NETBET, an on-line bookmaker, yesterday marked its first day on the junior Ofex market with an astonishing rise.

The company, run by the bookie Mark Blandford, soared 102.5p to 172.5p as investors gambled on the success of the first-ever quoted Internet betting venture. NetBet, operated from an off-shore base to reduce tax liabilities, offers a 24-hour betting service on football, rubgy, cricket and horses.