Rates uncertainty keeps 4,000 barrier out of reach

The 4,000-point milestone remains tantalisingly out of reach. A break-through, which had seemed a mere formality after last week's ecstatic run, is proving to be surprisingly elusive and the stock market is looking in need of a confidence injection - or the satisfaction of a blockbuster takeover bid.

The latest round of company results should have helped sentiment. But the strong advance in retail sales, more pressure for higher interest rates from the Bank of England and an uncertain New York performance while London traded, conspired to inhibit investor interest.

Once again trading volumes were embarrassingly low, leaving many traders to ponder whether the holiday season is set to continue for the foreseeable future. There are attempts to generate activity. Analysts remain active and have not lost the habit of changing stance on shares. But a new rating seems to attract little investor interest; any subsequent share movement is usually the result of a market-makers' imagination.

The PDFM decision to switch equities into cash has had a disturbing impact. It has certainly provided support for the bears who have, with monotonous regularity, been rubbishing the market's strength. But despite their sad lament blue chips have put on a resounding display. Perhaps the psychologically important 4,000-point milestone will prove insurmountable, although it should, despite this week's sluggishness, be comfortably obtainable.

Footsie gently retreated 16.6 points to 3,955.7, a 21.5-point decline since Monday's peak.

Among blue chips National Power, with an investment presentation, gained 3p to 396.5p, enhancing PowerGen 8p to 506p. Granada reached an 883.5p peak with a 5p gain as it confirmed it had lifted its stake in Yorkshire- Tyne Tees TV to almost 27 per cent by exercising warrants. YTT gained 7.5p to 1,157.5p.

Guinness drifted 11.5p lower to 462.5p on suspected Barclays de Zoete Wedd caution and Bass was little changed at 792p following a more confident trading statement than had been expected.

Unilever, thought to be meeting analysts next week, weakened 8.5p to 1,373.5p and Northern Foods, also preparing to brief analysts, was unchanged at 201p. SBC Warburg reckon the shares should be 225p. Mercury Asset Management drew comfort from a Cazenove upgrading, gaining 15p to 1,022.5p and Thorn, the rental group due to fall out of Footsie, was tagged an income stock by NatWest Securities and responded with a 9.5p advance to 373.5p. RTZ, the mining group, lost 14.5p to 936p as Warburg lowered its profit forecast.

Among blue chips Pearson jumped 11.5p to 683.5p and BAA, on plans to improve access to Heathrow, rose 8.5p to 492.5p.

British Biotech's trading update lifted the shares 2p to 203.5p although Glaxo Wellcome, as expected, has decided not to take up its option on a BritBio asthma treatment. BTG's remarkable progress continued with a 72.5p gain to 2,025p.

Blenheim, the exhibition group, was little changed at 421p. Reed and United News & Media remain the favourites to strike but there is a sneaking suspicion US interests are edging into the bid frame. One thought to be looking at Blenheim is Ziff Davis, a computer magazines and exhibitions group.

Pentland, the shoe group, was 100p although two big lines of stock went through at around 97p.

L Gardner, the engineer, put on 3p to 175.5p on Teather & Greenwood support. The broker expects year's figures, due in November, to come out at pounds 2.4m against pounds 1.8m.

Hunting, the aviation group produced a pounds 14.2m loss and dropped the interim dividend. The shares rose 12.5p to 153.5p with takeover speculation helping fuel the price. Avon Rubber jumped 26p to 751p on talk of imminent corporate activity. The shares have climbed from 474p since February.

On Demand Information, an electronic publisher, improved 23p to 135.5p. It is in the last stage of what it calls "a significant product development" involving delivery through the Internet. The shares were 217.5p earlier this year.

Electrophoretics, a medical diagnostic business, managed a 5p gain to 65p. It has endured a volatile time since arriving on AIM. The price reached 200p last year.

Like many biotech tiddlers the company is loss making. It is working with the Government on a possible system to diagnose BSE in cattle and also specialises in nerve related back pain, brain damage and cancer.