Market report: Oil shares higher in knee-jerk reaction

RENEWED TENSION in the Gulf had the predictable impact on the stock market; oil shares moved higher as the crude price strengthened. Although the world's oil supply is regarded as more than adequate a knee jerk reaction was inevitable.

So British Petroleum rose 13.5p to 899.5p and even much-criticised Shell flared 11.25p to 354.5p. Enterprise Oil ended 20p higher at 395p and Lasmo was up 5.5p at 173.5p.

Some defence stocks strengthened on the prospect of military action against Iraq, with British Aerospace 6p stronger at 444p and General Electric Co 4p firmer at 476p. Cobham, helped by an analysts meeting at Dresdner Kleinwort Benson, climbed 47.5p to 805p.

The Iraqi brigade advanced as most of the market retreated. Footsie, at one time off 74.4 points, ended 27.8 down at 5,449 in moderate trading. Supporting shares also gave ground.

It was generally another lacklustre display with any near-term interest rate cuts on this side of the Atlantic seemingly ruled out but the prospect of another US reduction still high on the agenda.

EMI, the showbiz group, fell 14.5p to 350p with DKB negative. WPP, the advertising consultancy, lost 11.5p to 320p as Warburg Dillon Read offered caution.

Prudential Corporation firmed 2p to 822p following a presentation for its US offshoot Jackson National; a US quote for the Pru seems to be on the cards. GRE, the old Guardian Royal Exchange, was back in the takeover spotlight, jumping 9p to 292p in a late flurry of trading.

British American Tobacco firmed a further 6.5p to 523.5p on hopes of a US smoking and health settlement, but Pearson fell 31p to 1,000p as further difficulties seemed to loom over its US Simon & Schuster deal. The US fund which has agreed to buy part of S&S wants to cut the price it agreed to pay.

Granada continued to encounter anxiety over the ONdigital launch, falling 26p to 860p. Its digital partner, Carlton Communications, firmed 9.5p to 412.5p. Lehman Brothers is encouraged by ONdigital's prospects. It believes the digital interest is worth 35p a Granada share and 46p a Carlton share. Analyst Julien Roch says: "We see ONdigital as an investment of little risk for Granada ... which could bear high rewards." The shares are regarded as a buy.

Zeneca firmed 28p to 2,283p following its decision to sell its specialities division, which could fetch up to pounds 1bn.

Danka Business Systems had another difficult session, off 6p to 63p. The hard-pressed group underlined its change of fortunes with half-year losses of pounds 1.77m against a pounds 43m profit. The shares have crashed from almost 850p in the past two years.

Ladbroke's trading statement lifted the shares 6.5p to 231.5p. But BT fell 35p to 808p, registering disappointment that it was not raiding its cash pile for a special dividend or a share buy-back.

Debenhams hardened to 382.5p as HSBC upgraded but Next was torn 19p to 471p after ABN Amro reduced its profit forecasts by pounds 5m to pounds 158m and by pounds 10m to pounds 168m. It regards the shares as overvalued.

Exporters were tortured by sterling's renewed strength. Engineer Siebe weakened 9p to 225p and Rolls-Royce 7p to 223p.

A rash of profit warnings from under-card currency-sensitive shares also ruffled sentiment. United Overseas warned about second-half profits and fell 18.5p to 27.5p; engineer Haden Maclellan gave up 22.5p to 59.5, after saying year's figures would be below expectations, and lower profits from Oxford Instruments clipped the shares 45p to 167.5p.

Computer group MR lost 14p to 85.5p after a downbeat trading statement, and World Telecom softened 21p to 75p following a warning that losses would be higher than expected.

Heritage Bathrooms steamed a further 16p higher to 212.5p as a 220p-a- share offer duly appeared; Allied Carpets remained just short of bid action with the shares holding at 53p in busy trading. One buyer for 66,000 was prepared to pay more than 55p

Delta, the electrical group, put on 7p to 140p in brisk trading. The market expects a bid. At one time TT was the favourite to pounce but the acquisitive engineer sold most of its share stake.

Graham, the builders merchant, added 7.5p to 136.5p on hopes of a CRH bid. Rage Software, the computer games group, shaded to 9.5p. It has switched stockbrokers, moving from Durlacher to Teather & Greenwood.

Express Dairies rose 5p to 155p. BT Alex.Brown and Charterhouse Tilney rate the shares a buy. The investment houses expects profits of around pounds 60.5m this year and further progress next year. City Centre Restaurants attracted attention, gaining 7.5p to 69p.

SEAQ VOLUME: 814.3m

SEAQ TRADES: 52,560

GILT INDEX: n/a

With beer and cider corporate action taking place, can a Scotch whisky bid be far behind? Burn Stewart, the hard-pressed group, jumped 6p to 19p. The whisky producer, specialising in own-label brands, has had a difficult time. Floated at 140p seven years ago, the shares touched 160p but have been down to 10.5p. It could be that its fortunes are improving but it is more likely buyers are anticipating bid action.

BICC was back in the spotlight with buyers still banking on a demerger of the cable and construction group or a takeover bid for the whole group. In busy trading, Seaq put turnover at almost 21.5 million shares, the price hardened 3p to 57p. Four years ago BICC was riding at 465p. Early this week the group met analysts to present its case and try to ease speculation of corporate activity.