Market Report: TI Group stages a crucial rally as it struggles to stay in Footsie

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TI Group was engaged in a rearguard action to preserve its cherished Footsie membership. The shares rose 27p to 527p, adding a crucial pounds 130,000 to its capitalisation and, just possibly, offering the sort of incentive to help the engineer avoid the dreaded drop.

The Footsie steering committee is due to meet tomorrow to decide the composition of the blue chip index, which has lost some of its reputation for reflecting the state of the upper end of the stock market since the Stock Exchange introduced its controversial, much criticised order driven trading system in October.

Order book trading in Footsie shares has produced an array of silly prices at the close which have, despite their questionable reliability, been blissfully incorporated into Footsie calculations.

TI, a long established Footsie constituent, had seemed impervious to relegation until early in October. Then its shares, riding at an impressive 690p, began to wilt, with Lehman Brothers suggesting they were overvalued.

Misplaced worries about the impact of sterling's strength on group trading also took their toll. The shares fell to 456.5p last month before staging a much needed rally.

RMC, the building materials group, is the other likely casualty. The shares fell 22p to 913p; they have been as high as 1,125p.

British Energy and Mercury Asset Management are expected to be the replacements. For MAM it will, however, be a short-lived return. The shares, which lost their Footsie status in the last review, are strong following the surprise bid from the Merrill Lynch investment house. The agreed takeover is likely to be completed early next year, prompting the elevation of what is at the time the best performing Footsie reserve.

Diageo, the unlikely moniker for the combined Grand Metropolitan/Guinness drinks cocktail, will also create a few problems. Next week Guinness becomes Diageo and GrandMet, in effect, disappears. So the committee could reinstate one of this week's casualties. But it won't. It will again raid the reserves and the then highest placed will become a Footsie constituent. In the meantime GrandMet rose 12.5p to 582p and Guinness 13p to 585p.

As tracker funds which invest in Footsie stocks continued to try and anticipate the committee moves, Footsie had another festive session, gaining 44.5 points to 5,187.4. At one time it was up 80.6.

Christmas has, in effect, come early for the market this year. Normally the festive cheer becomes pronounced in the second half of December. However yesterday's advance lifted this month's already heady upsurge to more than 350.

Financials again led the charge. The huge Swiss banking merger, which is bound to cost up to 3,000 City jobs, inspired money shares, with National Westminster Bank, now the target for all seasons, gaining 58p to 998p. A strike by Barclays, up 27p to 1,573p, is regarded in some quarters as inevitable. Both banks have jettisoned their investment banking operations and, it could be argued, now need each other as never before.

Lloyds TSB, 25.5p firmer at 785.5p, is regarded as the natural predator for Norwich Union, 10p up at 390p. Other financials in the money included Royal Bank of Scotland and Woolwich.

Blue Circle Industries, the cement group, fell 21.5p to 328.5p as Dresdner Kleinwort Benson downgraded, and last week's profit warning lowered BTR a further 3.5p to 179p.

Profit warnings hit publisher Quarto 32p to 69.5p and marketing and plastic group Princedale 4.5p to 18p.

Christies International, the auctioneer, decided to announce the end of takeover talks which the market was unaware had started. The shares rose 1p to 249.5p. Lonrho, up 4p to 93p, confirmed it may bid for JCI, the South African mining group. Telewest Communications gained 6.5p to 79.5p on reports of a US West assault.

First Leisure Corporation hardened 2p to 271p as Charterhouse Tilney drew attention to its takeover vulnerability. "Sooner rather than later the company's future will be resolved and it is still in management's hands to turn fortunes around. End game or a recovery stock? Investors should profit from either," say analysts Andrew Burnett and Melanie Sharp.