Market report: Storm clouds retreat but thin trading makes for an unreal surge

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The Independent Online
Equities enjoyed their best day for seven weeks as the Far and Middle Eastern storm clouds suddenly looked less threatening. With New York responding, Footsie staged a 125.2 points advance to 4,867.

Turnover, however, was once again thin. Whether the lack of trading was another indictment of order-driven trading or represented overall uncertainty was not clear.

Volume, at 584.9 million, was not much above the stock market's alleged break-even level and some described Footsie's heady progress as one of the most unreal surges ever experienced.

It was very much a blue chips party. The supporting Midcap shares experienced little more than a nodding acquaintance with the advance and down among the little 'uns euphoria was conspicuous by its absence with the FTSE SmallCap index managing a token 1.5 points gain to 2,288.1.

Financials, a major force in this year's Footsie gallop, were in the forefront, excited by renewed speculation of a Barclays assault on National Westminster Bank. Barclays rose 30p to 1,490p and NatWest 15.5p to 870.5p. Talk that Deutche Morgan Grenfell could be about to clinch a deal with UBS, expected to make a statement on Friday, added to the excitement.

Among insurers, where there is an almost ceaseless flow of bid speculation, it was the turn of Sun Life & Provincial to lead the charge with a 25p advance to 388p. Commercial Union and General Accident joined the fun.

Norwich Union, still the favourite insurer to encounter bid activity, shrugged off a negative Credit Lyonnais Laing circular, ending 2p higher at 366.5p. At one time the shares were down 3.5p. The securities house estimated Norwich's theoretical take-out value at 330p and said the shares "stand at a premium to sensible bid valuations".

Barclays and Lloyds TSB have been named as possible Norwich predators. Former building society Halifax is another in the frame.

The more settled Far Eastern atmosphere had the predictably soothing influence on HSBC, up 61p to 1,477p, and Standard Chartered, 20p to 642p. The Hong Kong market recovered 4.6 per cent after shares in Tokyo had responded to Japanese government action over a troubled banking operation.

Excitement erupted on the oil pitch despite lower crude prices as Iraqi tension eased. British Petroleum and Shell are getting more deeply involved with the Russians, with BP, up 36p to 874p, splashing out $750m buying 10 per cent of Sidanco, Russia's fourth largest integrated oil group, and acquiring an interest in an associate company.

Shell, 17.5p higher at 418.5p, is investing $1bn in RAO Gazprom, the largest Russian group which accounts for 20 per cent of the world's gas reserves.

Bid favourite United Biscuits hardened 25.5p to 219.5p following its reluctant, even belated, withdrawal from its Australia and European biscuits build-up. UB collects $410m from the US giant PepsiCo and plans to return pounds 150m to shareholders.

Associated British Foods, seeking Whitehall approval to bid for Dalgety's milling operation, rose 19p to 559p; Dalgety hardened 6.5p to 247.5p. There was talk that UB, shorn of its Australian snack food excursion, could attract cash-rich ABF.

Care First rose 5p to 158.5p. The possibility of a US bid was confirmed by venture capital fund Warburg Pincus. Bupa, which bid 150p last week, let it be known its offer may not be its final shot.

Premiere, a jobs agency, fell 9.5p to 215p as Sinclair Montrose emerged with a near all-paper offer. With Sinclair shares down 58p at 185p the share exchange offer is worth around 203p. Shareholders representing 50.73 per cent of Premiere have accepted.

Marks & Spencer added 18p to 600p. Panmure Gordon forecast it will enjoy a role as a "global retailer" and has put a 700p target on the shares.

Tullow Oil remained in demand on a mixture of takeover and exploration hopes. The shares rose 3p to 139p. The group has developments in Pakistan and is among companies waiting for licensing results in Bangladesh.

BAA, the airports group, rose 7p to 501p. Daiwa regard the shares as a short-term sell.

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