Market Report: Oil price fall lubricates buyers

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BLUE skies returned to the market yesterday, with share prices making strong advances for most of the session. A fall in oil prices, hopes of a fresh round of European interest rate cuts and strong buying of futures pushed the FT-SE 100 share index up by 25.9 points to 3,093.1 - its high point of the day.

Trading was brisk. Nearly 700 million shares changed hands in almost 28,000 trades. There were reports that trade had been boosted by the recently launched Lloyd's insurance market trusts ploughing their funds into equities. London Insurance Market Investment Trust, unchanged at 99p, said it had invested pounds 238m in a portfolio of UK equities tracking the FT-SE 350 Index.

It has also invested in a put option, which expires on 3 October next year and covers the value of the equity portfolio. It is exercisable in the event of a fall of the FT-SE 100 Index in excess of about 11 per cent.

Hopes of further reductions in interest rates were kindled by an optimistic speech on Germany's economic recovery potential by Johann-Wilhem Gaddum, the Bundesbank's vice-president.

His remarks injected some cheer into the builders and building material companies. Redland was one of the main gainers with a 22p leap to 563p. Much better than expected interim profits lifted BPB Industries 11p to 278p. Pilkington rose 7p to 159p as rights issue fears subsided.

The good news on oil came from Opec's decision to hold production at 25.4 million barrels a day. The price of Brent crude for January delivery dropped by 87.5 cents to a five-year low of dollars 14.55 a barrel.

Gilt-edged stocks improved by around pounds 1 4 as the low oil price provided a fillip for inflation prospects.

Opec's decision had an adverse effect on oil stocks, although prices rallied towards the close. British Petroleum, off 5p at one stage, closed 1p easier at 323p. Shell lost 3p to 684p.

Chemicals, on the other hand, benefited from the oil price fall. The sector was also aided by SG Warburg turning positive on Imperial Chemical Industries, which spurted 45p to 719p.

Warburg's stance has been adopted because of good prospects for increases in petrochemical prices arising from the growing possibility of producers making reductions in capacity.

Almost 6 million ICI shares were traded. Yorkshire Chemicals firmed 4p to 397p, Laporte rose a penny to 649p, as did Courtaulds to 429p.

ICI was one of 73 Footsie constituents to advance. Most of the fallers lost just a couple of pence, except for Enterprise Oil, down 15.5p to 439p, and PowerGen, which fell a further 8p to 449p in the wake of the previous day's warning that its market share of electricity generation was set to shrink.

Volume trading in United Biscuits was high at 4.3 million, and appeared at one stage to be going through the roof with screens falsely showing a trade of 8 million. UB fell 2p to 335p.

All this hunger for equities continues to steer Smith New Court, the securities house, upwards. The shares gained another 3p to 371p. The shares have more than quadrupled from 89p over the last year.

Smith is set to produce interim results on 7 December. Analysts expect pre-tax profits to rise to pounds 27m, compared with the 11 per cent drop to pounds 6.7m in the same period last year. ShareLink, the Birmingham-based execution- only share dealing company, added 6p to 382p.

Euro Disney had a down-and-up session following the 68p plunge on Wednesday on concerns about the company's refinancing. They slumped to 268p in early dealings, before recovering to 330p, up 12p on the day.

The regional electricity and water companies remained in demand for their dividend yields. Among the electricity stocks, Eastern gained 3p to 592p, Northern added 3p to 630p and Yorkshire put on 4p to 624p.

In the water sector, Anglian closed 6p better at 544p, Southern increased by 5p to 588p and Welsh advanced 6p to 648p.

There was more lively action amid the television companies. Yorkshire-Tyne Tees continued to lose favour after the proposals to liberalise the takeover rules. Shares fell 16p to 178p.

LWT climbed to 526p, up 19p. The company is tipped as one of the takeover favourites. Similarly, HTV rose 3p to 95p - just 1p shy of this year's high.

Fidelity International continues to increase its stake in Tadpole Technology, ahead 4p to 271p. It bought 49,000, taking its holding to 990,000 - equal to 5.05 per cent.

There were another three debuts. Ruberoid, floated at 150p, hit 165p and closed at 163p. A heavy 12 million were traded, of which more than 10 million were handled by Robert Fleming. Biotrace, issued at 130p, closed at 145p. Lilliput Lane, offered at 135p, went to a 10p discount at 125p.

Buyers were back out in force with investors becoming convinced that any tax increases in the Budget will not be as harsh as first thought. With no distraction from Wall Street, closed for the Thanksgiving holiday, shares prices closed on a high note. The FT-SE 100 index rose 25.9 points to 3,093.1. Account ends today, and settlement is on 6 December.

Ten former brokers who were made redundant when Banque Indosuez closed the Carr Kitkat & Aitken UK equity business in September, have regrouped and launched London Wall Securities. The 10, led by Michael Burn and Michael Oliver, have also recruited John Martin from Robert Fleming Securities. London Wall Securities is a trading name of Shaw & Co, the brokers owned by the MeesPierson Group, the merchant banking arm of ABN-AMRO.