Market Report: Second liners have their day at last in the bull market

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Second liners, which have limped behind blue chips throughout the bull market, enjoyed a rare day in the limelight, arousing tentative hopes their underperformance may be coming to an end.

The FTSE 250 index put on 38.3 points to 4,545.2, its best gain for six months. It is, however, still a long way below its 4,729.4 record, hit in March.

Footsie, demonstrating it is still in top form, stretched to yet another peak, up 32.6 at 4,757.4.

The poor display of second liners is one of the main mysteries of the bull run. On odd occasions second and third liners have come to life but generally they have left the running to blue chips.

As Patrick Orr at Panmure Gordon pointed out recently smaller companies normally outperform their peers in a bull market. They need rip-roaring displays to counter the miserable times experienced in bear conditions.

Footsie's responsive relationship with New York is clearly one factor behind the split market. The rush to build financial portfolios ahead of the various demutualisations is another. But even favourable economic or political developments seem to have been largely ignored by the smaller caps whereas blue chips have reacted.

This year Footsie has surged more than 600 points, hitting 28 peaks in the process.

Its latest gain owed much to another outstanding display by New York, exploring new highs during London trading. Hopes the long-awaited trans- atlantic interest rate increase will drift even further into the distance after soft retail figures spurred Wall Street.

Litigation hopes boosted BAT Industries, up 20.5p to 596p, and Imperial Tobacco, 14.5p to 411.5p. First-quarter profits lifted LucasVarity 7p to 211p and General Electric Co, 8.5p higher at 369p, continued to respond to hopes of a deal with British Aerospace.

The fall-out from the Footsie shake-up was muted. Relegated Burton lost 1.5p to 124.5p but its fellow sufferer, Smith & Nephew, put on 4.75p to 176.75p. Among those removed from the FTSE 250 index WS Atkins lost 17p to 259.5p; Laura Ashley 2p to 78p and ML Laboratories 2.5p to 173p.

Johnson Matthey, the metals group, led the FTSE 250 charge, jumping 61.5p to 523p on better-than-expected figures and Booker added 21p to 298.5p, ahead of analyst meetings next week.

Scapa, the chemical group, gained 15.5p to 214p following results.

BT fell 8p to 470p as Lehman Brothers moved the shares from its buy list and Oftel raised doubts about an early end to the broadcasting ban. Cable & Wireless dialled a 2.5p gain to 543.5p as directors, including chief executive Dick Brown, picked up 58,000 shares,

Takeover approaches left their mark. Holiday group Inspirations rose 1p to 80.5p and Appleyard 19p to 90p. Stationery group Nobo gained 13.5p to 138.5p as a 140p offer appeared.

Suggestions Tesco is preparing a bid for WH Smith had little impact. Smith fell 3.5p to 421.5p; Tesco firmed to 386p.

Eurotunnel fell 3p to 68.5p as it become known any decision on extending the channel concession was unlikely for some time.

Imperial Chemical Industries, 6.5p stronger at 861.5p, and BOC, 34p at 1,066p, were powered by US interest; Shell gained 16.5p to 1,233.5p on continuing hopes of a rich Nigerian oil strike.

Frost, the petrol group being renamed Save, lost 8p to 85.5p as the Office of Fair Trading launched an inquiry into petrol pricing and a 1 million- plus trade at 82p went through. Kwik Fit, the tyre and exhaust operation, added 4p to 262.5p following investment meetings in Scotland.

RioTinto, the resources group, gained 14.5p to 1,092p as copper hit a 12 month high.

Jarvis, awaiting bumper profits and a rail maintenance deal, romped ahead 23,5p to 319p, another peak but Bluebird, the toymaker, found a new 12-month low, 85.5p, off 7p.

Shield Diagnostic continued its volatile display, gaining 62.5p to 560p; Drew Scientific lost 10p to 137.5p.

Plantation & General rose 5p to 77.5p. Fund manager Nick Roditi, with nearly 30 per cent, wants chairman Konrad Legg replaced by former Bank of England man Rupert Pennant-Rea.

High-flying pubs chain, JD Wetherspoon, drifted 7.5p to 1,377.5p as NatWest Securities attempted to lower the temperature. NatWest's Geof Collyer said: "Whilst we remain long-term fans of Wetherspoon the shares are trading above current fair failure".