MARKET REPORT:Abbey National surge underlines its muscle

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The FT-SE 100 index rose 15.1 to 3,048.3, but the supporting FT-SE 250 index fell 5.7 to 3,465.3. Turnover was 570.6 million shares with 19,854 bargains recorded. Gilts ended below best levels.

Abbey National produced the day's most intriguing performance. In often busy trading shares of the building society turned bank jumped 13p to 439p on persistent buying through one securities house.

In a week when bank-bashing has proved a popular pasttime Abbey's sudden advance caught most observers on the hop. There was hopeful talk it planned to flex its corporate muscles, perhaps shooting for an insurance business or building society.

With a stock market valuation of £5.6bn, Abbey has the ammunition to make large acquisitions.

Its profits, due in March, are likely to show spectacular progress, although they will be overshadowed by the advances scored by Barclays and National Westminster. Even so they should come out at about £870m against £704m.

Abbey shares are nearly 100p below their 1994 high. They have been hit by worries about intensfying competition in the financial services industry and the sluggish state of the housing market.

The rest of the stock market staged a late rally. It drew encouragement from a powerful New York performance, which reflected an easing of transatlantic inflation and interest rate fears following the latest economic statistics.

The FT-SE 100 index ended 15.1 points higher at 3,048.3. But there was little substance to the advance, with trading again thin. In what has been an uneventful week the index has retreated 16.7 points.

With buyers, big and small, content to sit on the sidelines the volume of trading has often been discouragingly low, reinforcing fears that job losses may be a feature of the opening months of the year Besides the by now customary interest rate worries the market has been unsettled by the Mexican financial crisis and its impact on sentiment towards other emerging markets.

Government stocks were firm although the unexpected announcement of a conventional gilts auction later this month prompted profit-taking in the last hour of trading.

Saatchi & Saatchi's decline was at last arrested with the shares gaining 5p to 102p.

Rank Organisation continued to smart from disappointment over the terms of its Rank Xerox sale. There is talk of institutional opposition being mounted when the deal is put to shareholders.

The sale values RX, once regarded as the jewel in Rank's crown, at £1.55bn against market estimates of £2bn. The shares fell 7p to 374p.

Wellcome was another under pressure, off 15p at 664p as the US authorities appeared to rule out over-the-counter sales of its Zovirax herpes drug which had been expected to be worth £400m.

BT's expected decision to sell its shareholding in AT&T, the US. telecommunicatiions giant, lifted the shares 6.5p to 408p.

Redland fell 12p to 442p as some analysts trimmed profit forecasts following a meeting with the building materials group. Positive noises from Hoare Govett lifted RTZ 12p to 788p.

Retail shares took on a more cheerful appearance as the steady flow of festive trading statements indicated that, contrary to some expectations, the high street had enjoyed at least some seasonal benefits.

Great Universal Stores put on 11p to 536p; Marks & Spencer 5p to 390.5p. Kingfisher, revealing details of its festive trading next week, was unchanged at 428p.

Colorvision, the Liverpool-based television and video retailer, edged ahead 3p to 37p, a two-day gain of 8p. Profits fell sharply in the year to April. Interim figures are due.

Filtronic, which makes components for mobile telephones, continued to have one of the busiest lines in the market - up 11p to a 202p peak. A bid is expected. The shares were floated at 105p in October.

GEI International, a maker of packaging and processing machinery, rose 5p to 88p as a trade went through above the then market price. API, the packaging group, is regarded as a possible bidder. The shares held at 379p.

De La Rue, as its bid for Portals closed, gained 19p to 984p; Portals rose 9p to 1,048p.

Ennex, the resources group, edged ahead 0.75p to 13p. It has sold its gold prospect at Tyndrum, 60 miles from Glasgow, to a Canadian group for $4.25m and shares.

Memory Corporation, launched on the backwater 4.2 market by Henry Cooke Lumsden last month at 45p, stretched to 130p. The group has developed a system for revamping the 60 per cent or so of new chips that are unsatisfactory when they come off the production line. There are suggestions Memory could make profits of nearly £4m in the second half.

The solid performance of SEP Industrial Holdings, the distributor and manufacturer of industrial fasteners, is attracting attention. At 38p the shares are near their peak, with signs of discreet buying. There is talk of a takeover bid with the GKN giant rumoured to be prepared to offer 60p a share. Last year profits moved ahead strongly, reaching a peak of £3.77m.