Market Report: Reuters hits headlines on Internet rumours

REUTERS MADE the market headlines yesterday amid rumours of a major Internet tie-up. In a drab day for the market, the web talk left the information giant 11.5p higher to 870p with over 2 million shares traded.

Some switched-on dealers piled into the stock as they decided that the talk of Reuters' online deal was much more interesting than any story to be found on its news screens.

The whispers centred on Reuters' plans for a financial services website. According to well-informed traders, the media group is in talks to provide a major Internet operator with kit to set up an online financial services "one stop shop", with services ranging from share dealing to insurance. The speculation was given weight by talk that Reuters' upper echelons were in meetings with bankers to thrash out a deal.

Plenty of names of potential partners were mentioned, but the US giants Yahoo! and American Online were top of the list. Fans of AOL noted that the group has recently announced the launch of a free Net service in the UK and argued that a Reuters-sponsored financial services supermarket would be the ideal way to gain subscribers.

However, rival Yahoo! has also been known to be looking for partners to beef up its financial offering, and Reuters would not be a bad choice. Any tie-up would be a blow to Freeserve - which recovered from an early fall to close 2p higher to 195p - and its owner Dixons, down 35p to 1,136p.

The UK company certainly has what it takes to feed a financialservice.com site. Apart from its bulging news feeds, Reuters owns the on-line brokerage Instinet, which could easily be adapted to cater for retail investors.

Some takeover-hungry dealers dismissed the Internet talk and rehashed old rumours that Reuters could merge with Rupert Murdoch's News Corp - a far-fetched but not impossible deal.

Traders who did not want to punt on the jam-tomorrow promises of an Internet contract logged on to old-fashioned metal bashers. Defence engineer Vickers rocketed 10.5p higher to 172.5p on talk of corporate action. One of the rumours said that Vickers could be having a look at fellow tank-maker Alvis, up 11.5p to 159p, or even electronic group Fairey, 13p higher to 424p.

However, other whisperers talked of Vickers as prey rather than predator, reawakening talk of a bid from French competitor GIAT, cash-rich US fund Carlyle or the acquisitive domestic rival TI, 10.25p better at 512.75p.

Fellow engineer Bodycote also rose 9p to 401p on vague takeover talk. Blue-chip rival Invensys rose 5p to 340.75p after two small purchases and talk of big disposals.

When engineers are the most interesting thing in the market, you know it is a dull day. The FTSE 100 closed 5.4 points better at 6,126.4 after moving in a tight range for most of the session. A strong set of input producer price data triggered minor fears of a rate hike, but all was forgotten when Wall Street opened higher.

The midcap was even more depressed, ending an uneventful session 2 points lower at 5,969.1, while the Small Cap edged 2.5 higher to 2,730.2.

The developer Land Securities was hot property. The shares climbed 23.5p to 863p on talk of an upgrade from a major broker. Some dealers talked of a sector review as rivals British Land, 9.5p better to 526.5p, and Hammerson, 5p higher to 482.5p, were also in demand.

Braver minds said that Land Securities could be looking at a leaseback agreement with a major corporate partner.

Retailers were active. Boots bagged a 27.5p rise to 780.5p as investors noted their low rating compared to some peers. Vague talk of a merger with Kingfisher, down 13p to 682p, was also heard. Safeway, a perennial target for Kingfisher or Somerfield, firmed 4.5p to 235p.

Other supermarkets were hit by news of a price war by Asda, down 0.5p to 219.5p. Tesco, 3.25p lower to 167.25p, and Sainsbury, down 2.5p to 393.25p, were two casualties. Minnow Alldays plunged 10p to 69.5p after admitting financial problems.

Most recipients of British Energy's new A shares - part of its pounds 432m return of capital to shareholders - sold them back to the company, sending them 2.5p lower to 57.5p. The normal stock ended 5.5p down to 507p.

Shell flared 14p to 537p after a Merrill Lynch push, while AstraZeneca shot 35p better to 2,269p on revived whispers of a sale of its agrochemicals business to Novartis of Switzerland.

Among the fallers, Orange was squeezed 27.5p lower to 917.5p by Richard Branson's Our Price decision to sell mobile phones. Leisure group Granada finished 14.5p down to 603.5p amid vague talk of a tough second half and dislike at its reported purchase of a 9.9 per cent stake in Leeds Football Club owner Leeds Sporting, up 1.75p to 21.75p.

Building materials midcapper RMC crumbled 50p to 1,062p on fears that a fine by the German competition watchdog could wipe 10 per cent off profits. Rival Hepworth surged 8p to 220.5p amid vague bid talk. Builders' merchant minnow Graham built a 41.5p advance on an agreed 192.4p-a-share bid from Meyer, up 1.5p to 461.5p. Travis Perkins, 2p higher to 786p could gatecrash the deal or go for rivals Sharpe Fisher, up 23p to 242.5p, or SIG, 2p higher to 244p.

Bid talk and support from Investec pushed Rank 10.25p higher to 285p, while United Biscuits warmed 5.25p to 185p after putting its frozen foods unit up for sale. Conglomerate Tomkins rose 8.75p to 280.5p on reports of a mega management buyout.

Returning bid talk lifted British Biotech 2.25p higher to 22.5p, while whispers of a big upgrade by a broker helped oil explorer Soco to a 6.5p rise to 68p. Textile group Lamont unravelled 11p to 17.5p after forecasting lower profits, while IT recruiter MSB International plunged 11p to 146.5p on profit warning fears.

SEAQ VOLUME: 1.3bn

SEAQ TRADES: 64,082

GILTS INDEX: 105.91 +0.21

MICHAEL ASHCROFT's recent tribulations have not diminished his appetite for deals. According to rumours, Mr Ashcroft has been taking a look at AIM-listed Mears. The group, which yesterday firmed 1.5p to 13.25p after a small acquisition, specialises in building maintenance and would be a perfect buy for Mr Ashcroft's Carlisle Holdings. Any talks would be made easier by Mears' chairman Martin O'Halloran, a former associate of Mr Ashcroft.

THE CHEMICAL minnow Biofocus could be close to winning an important outsourcing deal with a major drug company. The shares, traded in the lightly regulated Ofex market, climbed 3p to 90.5p yesterday amid hopes of an announcement in the near-term. Some dealers believe that Biofocus, which carries out chemical work on behalf of pharmaceutical group, could be in talks with one of the sector's big hitters such as Roche.