Market Report: Investors pay premium for a pinta from Dairy Crest

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The Independent Online
Dairy Crest made a top-of-the-morning stock market debut. Priced at 155p the shares floated to 196.5p, comfortably ahead of the most optimistic expectations.

The rousing reception accorded the milkmen prompted speculation of a stake-building exercise. The near-21 million turnover included some lumpy deals and in the excitement it would not have been difficult to build a strategic interest.

However, the shares have benefited from a swing in sentiment in the market and the milk industry since the pinta issue was priced at the start of August. Then the FT-SE 100 index was, at best, just showing the first signs of starting its record-breaking run which continued yesterday, with Footsie climbing 13 points to a 3,918.7 peak.

And last week the Office of Fair Trading improved the trading climate for the milk companies by wringing promises from Milk Marque to modify its pricing system.

Even before such changes Dairy Crest was competitively price; rated lower than Northern Foods or Unigate.

So a milky-way launch was expected. Most dealers were looking for around 175p - a price too low to even contemplate in the rush following the opening bell.

The scramble will be appreciated by the 28,000 farmers, eligible for a handout worth some pounds 6,000 each, mostly in shares, when the former marketing arm of the disbanded Milk Marketing Board priced its shares for flotation.

The rest of the market remained confident as some big players, returning from their holidays, helped sentiment by alighting on shares that have failed to keep up with the herd in the August race.

However worries about the new Sequence computerised system continued to torment some dealers. There were apparent examples of trades being misrecorded and it was widely assumed that the reported volume - 623.9 million - was overstated.

The supporting FT-SE 250 index kept up its bounding run - gaining 9.5 to 4,437.8. It was the 20th consecutive plus - a winning streak last achieved in the summer of 1993.

A successful government stocks auction, better-than-expected trade figures, lower interest rate hopes and renewed takeover speculation kept the market on the uproad.

Lloyds Abbey Life caught the imagination, jumping 32p to 593p as the market latched on to the possibility Prudential Corporation might be tempted to splash out following the sale of its Mercantile & General reinsurance business.

However any deal would need the approval of Lloyds TSB with 62.6 per cent of the shares. And Lloyds could be reluctant to surrender such an important outlet to a rival.

Hambros, the merchant bank, rose 9p to 266.5p, a year's high. Its quoted Hambro Countrywide estate agency chain is due to report interim figures today. Its shares have moved ahead strongly on hopes it will be a big beneficiary of the housing revival. But as the market closed it became apparent Hambros could face corporate activity: Regent Pacific, a Far Eastern group, has quietly put together a 3 per cent shareholding.

United News & Media climbed 17.5p to 722.5p, reflecting the heightened tension in the media industry and its decision to sell some of its local newspapers.

Allied Domecq, up 15p to 466.5p, was the best performing blue chip, reflecting break-up hopes following the proposed sale of its remaining brewing interests. Peter Lucas at Credit Lyonnais Laing said: "The carrot of further action through demerger should support the shares for the short-term". Bass, which would recapture top brewing spot if the Allied deal goes through, gained 5p to 843.5p. Whitbread's Pelican restaurants acquisition is expected to get Whitehall clearance, a possibility that helped the shares 4.5p higher to 728.5p

Zeneca, up 17p to 1,520p, got another whirl on reported Goldman Sachs support and renewed speculation about the cash resources of Roche, the giant Swiss group tipped to bid.

Utilities were ruffled by reports the Labour Party is due to provide details of its "windfall" tax today; National Grid lost 3.5p to 177.5p.

General Electric Co, engulfed in the furore over George Simpson's pay packet, fell 5.5p to 391p. Salomon Brothers believe the shares are worth 340p.

First Information, a software developer, crashed 67.5p to 100p on a downbeat trading statement which spoke of a possible bid; Firecrest, the Internet group, said Camelot Corporation had sold its 10.5 per cent stake. The shares were up 5p at 59p.