Market Report: Next's smart rise leaves the rest looking dowdy

DEALERS FLOCKED to Next yesterday as talk of buoyant sales and bullish analysts' notes swirled around the clothes chain. The stock rose smartly throughout the afternoon and settled 9p higher at 748p as buyers did their shopping ahead of forthcoming interim results.

The word on the high street is that Next has had a terrific half and that results, due out on Wednesday week, could surprise on the upside.

According to shopping-mad traders, the purveyor of suits and skirts to the discerning middle-class customer has experienced a good spring and an even better summer.

In its May trading statement the company reported a 19.5 per cent jump in total sales thanks to last year's decision to revamp its supply chain and product offering after a disastrous profits warning.

Things appear to have picked up in the summer. While rival chains were forced to entice penny-pinching customers with longer sales, Next had a very short summer sale of just two weeks. As a result, the all-important full-price sales are expected to be sharply ahead. According to Morgan Stanley retail analyst Julie Ramshaw, a long-term buyer of Next, this bonanza should translate in interim profits of pounds 68m, compared with a mere pounds 44m last year.

The general bullishness on Next was compounded by whispers that a major European broker was preparing to reverse its long-time aversion to the stock with a positive research note.

New Look also caught the shopping bug . The trendy retailer bagged a 12p rise to 216.5p on talk of a strong uplift in summer sales and vague whispers of corporate action.

Activity in the rest of the market was more akin to a small-town shopping mall than the Harrods sale. The FTSE 100 finished 43.6 points higher at 6,375.7, but the closure of Wall Street for Labor Day reduced turnover to a thin 737 million.

The undercard was more exciting, with the FTSE 250 ending 50.8 higher at another all-time high of 6,173.2, and the Small Cap closing at a record 2,853.1 after a 16.1-point rise.

Drinks group Allied Domecq served up a cocktail of amusement and chaos. Friday's closing price was rebased from 583.5p to 328.5p to take into account the sale of Allied's pubs to Punch Taverns and Bass. However, a couple of information providers, including Reuters, mistakenly quoted a 370p opening price yesterday morning. When Allied's price started moving up on renewed talk of a bid from a foreign giant such as Pernod Ricard, the Reuters screens gave the misleading impression that the shares were actually falling. In the end, the mess was cleared up and Allied ended 30.5p up at 359p.

FTSE 100 heavyweight Vodafone AirTouch rang up a 48p rise to 1290p after confirming talks over a tie-up with US rival Bell Atlantic.

Most brokers are tipping a US phone joint venture, although braver minds favour a full-blown merger.

Bombed-out cable group Telewest Communications dug up a 9.75p rise to 254.75p as bargain-hunters were attracted by new talk of corporate deals. Orange pushed 23p higher to an all-time high of 1,076p.

Tobacco stocks were dragged higher by a positive ruling on a Florida court hearing. BAT rose 5.5p to 528.5p, while Imperial Tobacco jumped 24p to 738p even though it has little business in the US. Talk of a Philip Morris bid is still around.

Tesco bucked a weak supermarkets sector with a 4.75p rise to 197p on whispers of imminent buys and good trading. However, talk of depressed sales hit Morrison Supermarkets, 5.75p lower at 147.75p, and Somerfield, down 3p to 233p.

Insurer Legal & General shed 3.25p to 202p on the expected arrival of a 210p-a-share cash and paper bid from NatWest. The market does not approve of NatWest's decision to issue a wad of new shares to pay for the deal and sent it 9p lower to 1,134p.

Transport group Stagecoach, down 9p to 214p, was derailed by fears for overseas trading and talk of relegation from the blue-chips.

Among the minnows, a capital restructuring gave restaurant group Hartford an artificial 980 per cent rise to 63.5p, while British Biotech rose a real 6.25p to 37.25p on talk of a cancer drug link with a US pharmaceutical giant.

Reflective ink maker Reflec was flat at 3.87p despite talk of a major licensing deal in China. Video game designer Rage Software beamed 2.5p higher to a record 26.25p. There are whispers of strong forthcoming results.

Lingerie maker Sherwood Group rose 2.5p to 28p on revived talk of a management buyout at more than 40p per share. Applied Holographics sparkled 17.5p higher to 257.5p on whispers of contract wins for its 3D products.

SEAQ VOLUME: 737m

SEAQ TRADES: 72,604

GILTS INDEX: 106.04 -0.12

THE CLOSED-CIRCUIT TV and electrical group Silvermines, up 4.5p to 34.5p, is again buzzing with takeover talk.

Dealers believe the company could soon be targeted by a predator. The list of hot tips is headed by former managing director Clem Jansen, whose 46p-a-share bid was rebuffed a few months back. TT Group, the engineer which owns 6 per cent of Silvermines, could also have a pop. Any offer is likely to be pitched at more than 50p per share.

BOMBED-OUT minnow Dana Petroleum is believed to be close to a major announcement.

Well-connected traders are whispering that the exploration company could soon reveal a substantial gas discovery in one of its fields off the Dutch coast. Success in the project, jointly developed with two European partners, could inject some life into Dana's share price; the shares were unchanged at 9.5p yesterday, a long way from the 26p they touched three years ago.