MARKET REPORT : Rebound in prices fuels fresh optimism

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Shares stretched to their highest this year, prompting hopeful speculation that confidence is at last returning to the stock market.

Once again, US influences loomed large. New York's strength since Friday's unexpected fall in retail prices has created hopes that interest rate increases have at least been deferred.

At one time higher US rates were expected to be announced towards the end of this month. Now there are even hopes they will remain unchanged until the spring.

Even an expected upsurge in UK output prices was shrugged aside as much of the advance was put down to one-off factors, such as higher drink taxes.

The FT-SE 100 index finished at its best of the day, up 28.4 points at 3,076.7. But trading was again thin with a three-way trade in little Fortune Oil helping to balloon turnover to a relatively modest 638.7 million.

The trade in Fortune involved a 27 million sale by a former executive, Ng Juak Khoon. Ellis & Partners sold the shares to Hoare Govett at 5.25p; Hoare, in turn, placed them with institutions. The price closed at 5.5p.

Among leaders, Argyll, the Safeway supermarket chain, edged forward 3p to 269p on continuing rumours of a bid from Hanson, up 5.5p to 245.5p.

Ladbroke improved 3p to 174p as the US Home Depot do-it-yourself group took over from J Sainsbury as the most likely bidder for the Texas DIY chain. Hampden, the Texas operator in Ulster which is nearly 30 per cent owned by Ladbroke, rose 5p to 36p.

The holiday industry was agog with rumours about Rank Organisation's ambitions. The £620m sale of most of its Rank Xerox stake and a $500m multi-currency programme could allow the leisure group to flex its corporate muscles.

In the travel industry there is talk Rank may buy the 20 per cent German stake in First Choice and then bid for full control or attempt to add Eurocamp to its existing Continental holiday business.

Another yarn suggests a much more spectacular deal - a bid for Airtours, the second largest holidays group which has an enviable profits record. Airtours is meeting Scottish investment institutions today and tomorrow.

Berisford International, the kitchens and bathrooms group, came back to market following its US acquisition at 273p, up 45p.

But Tadpole Technology tumbled 82p to 252p as it warned that first-quarter losses were higher than expected. A flat Christmas trading statement left House of Fraser 3p lower at 167p.

Saatchi & Saatchi, as fund manager PDFM lifted its stake to 13.61 per cent, rallied another 9p to 111p and VSEL again drew support on hopes of an early bid clearance, up 23p at 1,436p.

Cable and Wireless, on hopes of a link with the the German industrial giant Veba, put on 11.5p to 377.5p. De La Rue, with 88 per cent of Portals under its corporate belt, rose 20p to1,004p.

British Steel enjoyed Hoare Govett support, gaining 3.5p to 151p, but British Airways dipped 6p to 379p ahead of what is expected to be yet another poor set of USAir figures later this week.

Bakychik, seeking gold in the former Soviet Union, plunged 35p to 189p on worries it had encountered unexpected mining difficulties. The company said progress was "satisfactory".

SEP Industries edged forward 3p to 41p on talk of a GKN bid and Filtronic, a maker of mobile telephone equipment, advanced another 4p to 206p on takeover talk.

Robert H Lowe, a printing and packaging and sportswear group, rose 1.5p to 11.5p following its first profit - £782,000 - for five years and the appointment of Andrew Dalton, ex-Sidlaw, as chief executive.

SR Gent, the Marks & Spencer clothing supplier, held at 77p as BWD Rensburg forecast a swing from a £4.3m loss to a £6.6m profit this year with £7.6m next. Analyst Sahill Shan rates the shares a buy.

Tamaris, the once struggling nursing homes group being revamped by William Fitch, lifted interim profits to £118,000 and should make, believes stockbroker Teather & Greeenwood, about £250,000 for the year against just £8,000 last time. It has leased fournursing homes in Ulster and now has 455 beds. The shares held at 2.25p.

Welsh Gold, which runs a mine at Dolgellau in the Snowdonia National Park, is the latest to announce it is on its way to the backwater 4.2 share market. Birmingham-based Brook Corporate Finance hopes to launch the shares in the next three weeks. The min e opened in 1863 and was acquired by the present management, led by Roland Phelps, in 1992.

The FT-SE 100 index rose 28.4 points to 3,076.7 but the supporting FT-SE 250 index was confined to an 8.6 gain to 3,473.9. Turnover was 638.7 million shares with 21,707 bargains. Gilts gave ground.