MARKET REPORT: Investors seduced by the sweet sound of cash registers

As the Bank of England deliberated over the size of today's interest rate increase the stock market was enraptured by the ring of cash tills.

Dixons, the electrical retailer, created the excitement. It offered astonishing evidence of the sales surge being enjoyed by retailers as a result of the conversion windfalls from former building societies Alliance & Leicester, Halifax and Woolwich and the Norwich Union insurance group.

Stock market analysts quickly lifted their profit forecasts for Dixons and a host of other retailers and likely beneficiaries of the windfall loot.

Dixons led the blue-chip leader board with a 44p gain to 536.5p. At one time the shares hit 543p. Last year's profits, largely free of windfall influences, emerged at pounds 190.2m, a shade below expectations. However comments by John Clare, chief executive, on current trading left analysts breathlessly increasing their current-year forecasts with Nick Bubb at Societe Generale Strauss Turnbull shooting for pounds 240m and suggesting the shares could hit 600p.

The Dixons exuberance spread to other leading retailers with Marks & Spencer gaining 26.5p to 534.5p and Kingfisher 28p to 692.5p.

Boots 20.5p to 782p, Great Universal Stores 16.5p to 614.5p and Next 23p to 708.5p were also in the money.

Superstores built on their recent strength with Asda 1.75p firmer at 139.25p and Safeway up 12p to 387p. Surprisingly housebuilding and leisure shares, by and large, made only modest progress.

Footsie managed to close with a 3.9-point gain at 4,762.4. In a roller- coaster session the index moved from extremes of a 19.6 gain to a 28.7 loss.

Overseas earners continued to reflect the power of the pound with Wolseley off 20p to 425.5p and Reuters 23.5p to 568p.

TI, the engineering share hit hard by sterling's strength, scored a 9.5p gain to 466p. The group believes it has been unfairly lumped with the sterling sufferers. Only 10 per cent of its turnover is exported. Paribas, the French-owned investment house, upgraded its advice to buy because "there can be no way that the fundamentals for this group have deteriorated as sharply as the share price". Analyst Chris Avery is looking for a modest profit increase to pounds 234m this year with pounds 260m next.

Railtrack put on 28p to 713p, still signalling relief over its windfall tax penalty and growing appreciation of the worth of its property portfolio.

Imperial Chemical Industries ran into yet another profits downgrading and, for once, US buyers failed to prevent a fall - 10.5p to 806p. HSBC produced the lowest estimates yet, cutting from pounds 470m to pounds 355m and from pounds 650m to pounds 585m. General Electric Co dipped to 352p; managing director George Simpson picked up 30,000 shares at 347p.

The drugs sector was under the weather. British Biotech's progress report created fears that key drugs had fallen behind schedule and the US Food and Drug Administration issued a "dear doctor" letter about Medeva's obesity treatment drug, Ionamin. BriBio fell 15.5p to 185.5p and Medeva 14p to 248p.

Low & Bonar, the paper and packaging group, tumbled a further 32p to 211.5p, lowest since 1992. Just two days after producing dismal figures it let it be known it would not renew a pounds 40m-a-year contract with Kellogg which ends in three years.

Insurances attracted another round of bid speculation with GRE 9.5p higher at 277p and Commercial Union, seen as a beneficiary of French pension changes, 15.5p to 672p. Woolwich fell 6p to 295p.

British Airways shrugged off strike worries, flying 19.5p higher at 692.5p, largely fuelled by US buyers.

Walker Greenbank, the wall coverings group, fell 5p to 47.5p, lowest for five years. Delayed trades, one at 44p, did the damage.

Chemical group Metrotect said it was unable to explain the weakness of its shares; they fell a further 4p to 29.5p against a 35.5p high.

David Glass Associates, the property management concern, shaded to 129.5p despite an approach, indicating a 153p share exchange offer, from Hercules Property Services, down 7.5p to 251p.

Armour Trust, the car accessories to personal care group, was another to disclose a bid approach. It coupled the news with a profits warning, falling 2.25p to 23.75p.

Properties were again firm; Warnford Investments continued to reflect the 10.32 per cent build up by rival Shaftsbury, gaining 15p to 235.5p. On the fringe Ofex market the tug-of-war over Display IT left the shares down 20p at 290p.