Market report: Shell remarks send BG to highest level since demerger

BG, the gas group, climbed to its highest level since the February demerger.

The shares flared 6p to 203p in busy trading as the stock market latched on to alleged comments from the Shell oil giant and strengthening hopes of a favourable report on the TransCo pipeline network.

When BG and Centrica emerged from the old unlamented British Gas they suffered a cool reception. Analysts seemed to compete to rubbish the shares. Centrica, once early takeover froth evaporated, has performed poorly. BG, however, after initial caution, has made strong progress with rumours of possible bid action providing much of the fuel.

Takeover possibilities helped yesterday's excitement. The market picked up rumours of intriguing comments by Shell at a US oil conference in London.

Shell was said to talked about its huge resources and the possibility it could hit the acquisition trail.

In market minds such words quickly spelt bid - and the long rumoured Shell strike for BG was on.

Shell said it had not made a presentation; executives would, however, have been in attendance.

The market has displayed a remarkable conviction that BG will eventually be a bid target. Besides Shell, such giants as British Petroleum and National Power have been dragged into the BG cauldron.

The TransCo report is a Monopolies and Mergers Commission affair. It should be published within weeks. The MMC was called in because BG felt a five-year price regime proposed by Clare Spottiswoode, the industry regulator, failed to strike a fair balance between shareholders and gas users.

If the MMC has come down on BG's side and its proposals are accepted by the Government it would represent a far reaching victory for the company.

Shares, awaiting the US interest rate decision, endured another downbeat session with Footsie ending 37.7 points lower at 4,607.5. Supporting shares took their lead from blue chips with the FTSE 250 index off 21.4 at 4,489.

The negative atmosphere was too much for high flying financials. Abbey National fell 28p to 931.5p and Lloyds TSB 17.5p to 598p. Barclays lost 39.5p to 1,205p. Martin Taylor, the chief executive heading a Government task force, is said to be due to deliver a pep talk at the rumoured up- for-sale BZW arm in the next few days.

Defence stocks were hit by US military cutbacks. And British Aerospace had to contend with the additional drag of the Government's postponement of a decision on the Eurofighter, falling 44p to 1,207.5p.

British Land fell 23p to 560.5p. It ruled out a bid for MEPC, off 11p at 486p.

Cadbury Schweppes slipped 7p to 525.5p as Societe Generale Strauss Turnbull said the shares were overpriced, and Merrill Lynch helped GKN 15.5p higher to 965p. Emap, the publisher, rose 14p to 732.5p with NatWest Securities suggesting an 850p target.

Cobham, the engineer, gained 12p to 638.5p. Last night Henderson Crosthwaite held an investment dinner at London's Savoy Hotel for 18 institutions.

Dixons fell 18p to 478p. The Office of Fair Trading denied it was investigating the electrical retailer over claims it used unfair tactics to force out- of-town shopping centres to deny space to rival retailers. The OFT said it was currently considering information supplied.

Royal & Sun Alliance fell 8.5p to 481p. Towards the close ABN Amro Hoare Govett and Cazenove launched the signalled buy back, picking up 15.1 million shares at 479p. Advertising agency WPP acquired 400,000 shares at 248p; the price fell 3.5p to 245.5p.

Johnson Matthey, the metals group, shaded to 488p despite a US road show. Engineer Billam put on 12.5p to 75p following an upbeat trading statement.

Hewden-Stuart, the plant hire group, rose 5p to 160p, highest for more than a year. Analysts have become more positive and there is vague talk of corporate action.

Wyndeham Press, the printer, gained 5p to 190.5p. It is acquiring Argent Colour for up to pounds 8.6m. Next month's results, it said, should "comfortably" meet market hopes which are around pounds 7.5m. The group's confidence prompted NatWest to lift its forecast for this year from pounds 8.5m to pounds 9.4m; it reckons the shares should be 255p.

Engineer Protean firmed 3p to 140.5p. It is expected to produce pounds 8.7m for the year ended March, down from pounds 10.3m. Around pounds 11m has been pencilled in for this year.