MARKET REPORT : Takeover fever among banks ends six-day losing streak

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The Independent Online
Shares ended six days on the run as takeover fever once again gripped the banks.

National Westminster Bank remained to the fore, leading the blue chip leader board with a 41.5p gain to 825p, just below the peak hit earlier this year.

With its trading difficulties and shareholder unrest NatWest is seen as an obvious takeover target with Barclays and HSBC, owner of Midland, regarded as the most likely predators.

SBC Warburg helped keep the banking pot on the boil by hanging a buy sign over NatWest and underlining the savings a merger could bring. It suggested the shares could have a 200p upside.

HSBC, the Hong Kong & Shanghai Banking Corporation, is thought to be anxious to mount a take over strike and is believed to have examined a number of financial groups.

Royal Bank of Scotland, up 15p at 598p, is reported to have attracted HSBC interest; so is Standard Chartered, up 38.5p to 912.5p.

Others caught in the banking excitement included Bank of Scotland, 7p to 385p and even Halifax, 11p to 760.5p. HSBC improved by 33.5p to 1,862p.

However, the next financial deal could be a relatively modest pounds 200m affair.

Cater Allen, the securities group, jumped 15p to 557.5p in late trading with one deal going through at 563p.

The activity could indicate that the Abbey National bid - the two have admitted they are in talks - has been agreed and is about to be announced. The offer should be more than 600p a share.

The increasingly powerful presence financial shares have established in Footsie helped the blue chip index shrug off the worst New York decline since the 1987 crash. It was rattled in early trading, off 37.5, but persistent, if highly selective, buying prompted a recovery and by the close Footsie was up 20.5 at 4,596.3.

New York's crash stemmed from fears Japan intended to raid its stockpile of US bonds. But a government statement denied any such plan.

There was relief in the stock market that the latest run of reverses lasted only six days. Still, such retreats do not even enjoy a rarity value. One occurred at the start of this month.

Footsie often stages a sharp rally after suffering the six-day punishment and earlier this month it went on to find its way to new peaks.

It would, however, be surprising if Footsie enjoyed a rampant run this time. The uncertainty surrounding Gordon Brown's Budget is likely to restrain interest and it would be surprising if much of the 200 points stripped from the Footsie calculation in the latest six-on-the-trot retreat is made up, at least until the dust settles on the Brown measures.

Grand Metropolitan slipped 3p to 585.5p as LVMH continued to buy, nudging its stake to 6.37 per cent.

WH Smith again suffered from Bill Cockburn's departure, falling a further 9p to 367.5p.

Carlton Communications and Granada scored from the British Digital Broadcasting success. But poor old BSkyB suffered a double whammy. Not only was it excluded from the BDB deal it also faced reports Premiership football clubs might develop their own television operations. Carlton rose 8.5p to 525p, Granada 19.5p to 854.5p and BSkyB fell 19.5p to 467.5p.

Reports Cable & Wireless Communications planned a deal with Telewest Communications stirred the respective shares. CWC rose 10p to 319.5p and Telewest 5p to 99p. Cable & Wireless jumped 26.5p to 585.5p in busy trading. There was vague talk of further developments in its relationship with Hong Kong Telecom.

Engineer BBA rose 7.5p to 357.5p ahead of a rumoured analysts' visit to its US operations. Johnson Matthey, with a similar event in mind, was a shade easier at 532p.

Airtours jumped 42p to 1,140.5p on holiday bookings and perennial takeover hopes and Brockbank, an insurance broker, climbed 130p to 672.5p as Bermudan re-insurer Mid Ocean bid 696p a share for the 49 per cent not owned.

John Lusty, the food group, returned to market at 9.5p against an 8.5p suspension.

More profit warnings appeared. Vero, involved in mobile telephone transmitters, fell 22p to 99.5p; Frederick Cooper, an engineer, lost 1.5p to 23.5p.

Floral Street, a design and graphics group, fell 35p to 212.5p from its suspension price. Trading was halted while talks were held with two advertising agencies which planned to reverse into Floral Street. But finance for the deal could not be raised.

Taking Stock

Harrisons & Crosfield, the chemical to timber group, has drifted after last month's excitement over its demerger plans. But the shares rose 2.5p to 112.5p as NatWest Securities said the group should now be on course for reshaping.

A "demerger should unlock modest value " and end the group's underperformance. Analyst David Allchurch's sum-of-the-parts calculation gives a value of 132p a share.

Zicor Mining should be scoring from the firm zinc price. Its Van Stone mine in the US could, on a zinc valuation, be worth more than the pounds 2.2m capitalisation of the company and may be reopened.

Zicor has a poor AIM record since it raised pounds 850,000 at 18p and arrived in February; the shares are bumping along at a 9.5p low.