Pre-election bid speculation finds a focus in BG; MARKET REPORT

As the election campaign got under way the stock market cast around for possible corporate activity to provide some action in the run up to polling day.

BG, the pipeline and exploration and production side of the split British Gas, emerged as the initial favourite for takeover attention.

In often brisk trading its shares, already regarded as wantonly overpriced by many analysts, jumped 5p to 173.5p.

Shell, often rumoured as being interested in British Gas before the break- up, was said to be lining up a deal. The generators, National Power and PowerGen, and assorted US groups were also put in the frame.

The Gas story, in one form or another, is, if nothing else, displaying remarkable resilience. Despite the poison pill of its deep-rooted and far reaching difficulties, rumours of corporate action refuse to die down.

The demerger, producing BG and Centrica, has, however, freed BG from many of the old problems and its extensive gas and oil operations could certainly be of interest to a group like Shell.

Centrica, too, has been subjected to bid speculation but the appeal of the gas distribution arm has faded and its shares, off 0.75p at 60.25p, are bumping along at their low.

Shell, in a firm oil sector, rose 6.5p to 1,089.5p and British Petroleum, as a US securities firm called First Albany said buy, added 6.5p to 709.5p.

Lasmo, with Pakistan strike hopes resurfacing, gained 4.5p to 256p and JKX Oil and Gas flared 12.5p to 46p.

The rest of the market had a typically pre-election experience. Footsie was at one time down 33.2 points, closing 16.5 off at 4,356.8. There was once again evidence of small investors locking in some of their profits from the bull run with private client stockbrokers often busy.

The possibility of a Labour windfall tax failed to dampen British Steel, up 4.5p to 158.25p; the planned merger between the German Thyssen and Krupp steel groups, was seen as likely to lead to firmer prices. Railtrack was another without a windfall care - up 3.5p to 464.5p. But Labour's tax proposal was not totally ignored; BAA, the airports group, fell 13.5p to 507.5p and ScottishPower dimmed 5.5p to 348p.

Reuters, probably weighed down by its big US involvement, fell to a new 12-month low - off 11.5p to 628.5p. Reed International, rumoured to be in the information group's sights, also gave ground, off 16p at 1,165p.

Cantab Pharmaceuticals was the latest to find it is better to travel than arrive. Its long-rumoured vaccine link with Glaxo Wellcome was finally confirmed and high flying Cantab promptly fell 60p from its 1.072.5p peak. Shield Diagnostic slipped 12.5p to 660p.

Reports of a price war in the music market, with Tesco and Safeway cutting album prices, sent WH Smith and EMI into a spin. Smith lost 19.5p to 459.5p and EMI 15p to 1,165p.

Imperial Chemical Industries remained under the whip of the Kleinwort Benson downgrading, falling a further 15p to 716.5p.

Rolls-Royce slipped 1.5p to 241.5p. Overseas shareholders now account for 29.34 per cent of the shares; if the 29.5 per cent ceiling is breached there will be forced selling.

Limelight, the bathroom and kitchen group, had that plug-hole feeling with the shares slurping 35p lower to 107.5p as it confirmed rumours of dismal trading. Dorling Kindersley, the reference book and CD-Rom publisher, lost 51p to 270p as the strong pound was blamed for an expected year's profit fall.

The plight of another CD Rom group, Epic Multimedia, worsened with the shares, floated at 105p in May, losing 25 per cent of their value and falling to a 9p low. The company produced a stark profit warning last month when it closed four fifths of its publishing arm, which represented pounds 1.7m of the group's pounds 4.2m turnover, and parted from with four directors.

Card Clear, the credit card protection group, put on 2p to 47p; it is buying a US company specialising in the prevention of telecom credit car fraud. Tomorrow CC plans a presentation to institutions.

Flextech, fresh from its deal with the BBC, slumped 64.5p to 686.5p as the market fretted about director share sales.

Hay & Robertson fell 17p to 127.5p. A few weeks ago the shares touched 178.5p. At last month's shareholders meeting the company, which has merchandising links with Terry Venables and Ruud Gullit as well as the Football Association, made an upbeat trading statement.