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Rumours surround Zeneca as Footsie drifts along; MARKET REPORT

Zeneca is back in the stock market limelight. As blue chips took a breather after their heroics, attention was directed towards the drugs group, for long a favoured takeover target.

It could have been because the heady excitement of the past two days suddenly evaporated and some of the more astute players found themselves with time on their hands.

So they alighted on Zeneca, which after some rip-roaring sessions has been surprisingly free from speculation in the past few months.

Two related stories emerged. The most widely rumoured was that Roche, the Swiss drugs giant for long seen as a likely predator, had blocked its corporate staff from taking holidays for the next two months. Such a development, ran the argument, could mean a long-suspected Zeneca bid was on.

Whether the holidays story was true or not the other leg of the yarn was much more relevant. JP Morgan, the US investment house, upgraded its Roche profit forecasts, prompting some US investors to buy into Zeneca. It was enough to lift the shares 37.5p at one time before a little profit taking clipped the gain to 29.5p at 1,653.5p.

Most blue chips were forced to play second fiddle as second and third liners took up the stock market running.

As Footsie drifted, ending 9.3 points lower, supporting shares moved ahead with the FTSE 250 index briefly reaching, for the first time since April, a new trading peak.

The leaders were unsettled by the flow of negative forecasts for shares in New York. Merrill Lynch's Robert Farrell is the latest prophet of gloom, predicting up to a 30 per cent decline this year.

The Ken and Eddie meeting created uncertainty and the gyrations of the Dow Jones Average did not help sentiment.

Even so, in early trading Footsie got to within hailing distance of 4,200, closing at 4,158.9.

Standard Chartered, the banking group, was the best- performing blue chip, up 33p at 744.5p, with SBC Warburg expressing confidence.

Schroders, the investment group, overcame NatWest Securities caution, with the ordinary shares 25p higher at 1,625p and the non voters 27.5p to 1,472.5p.

NatWest lifted its profit forecasts from pounds 223m to pounds 240m and from pounds 190m to pounds 236m. But analysts Rachel Lucas fretted about the increasing cost base as Schroders expanded its operations: "The risks to the business are building and the group is vulnerable to any setback in the extremely favourable conditions which it has enjoyed over the last two years."

Lehman Brothers lowered its Abbey National rating to underperform, clipping the shares 4.5p to 796p and sent out a buy signal for HSBC, up 40.5p to 1,426p.

British Steel and BT were actively traded, partly on bed and breakfast deals but also reflecting a technical position which encouraged market makers to borrow stock. Steel, following a positive analysts meeting, gained 4p to 150.75p and BT was 1.5p firmer at 416p, a 12-month high.

Sterling's strength continued to take its toll with Rolls-Royce, Wolseley and GKN leading the retreat.

Christies International rose 5.5p to a 265p peak. The auctioneer recently produced strong sales figures; the hovering presence of Joseph Lewis, the Bahamas multi-millionaire with approaching 30 per cent of the capital is another influence. English National Investment, controlled by Mr Lewis, put on 11.5p to 122.5p.

Prism Rail, meeting analysts next month, steamed ahead another 30p to 520p and GB Railways made further progress, up 25p at 267.5p.

Doeflex, the chemical group, rose 5p to 291.5p following meetings with analysts. Flying Flowers, figures next month, rose 5p to 207.5p.

Lanica, Andrew Regan's vehicle, fell 125p to 1,550p. After the market closed it produced a long-awaited statement. It said it was "not aware of any reasons for the substantial increase" in its shares in recent months and as an investment company could not invest more than 20 per cent of its assets in any one situation. As its shares moved from 58p to 2,050p such a statement would have been useful. The price has retreated in the past few weeks

A few car dealers moved up a gear on hopes of an improved deal from Ford; and waters and the remaining electricity distributors gathered support from Credit Lyonnais Laing.

Warburg said switch from National Power to PowerGen; advice which left NP 1p lower at 500p and PG 4.5p brighter at 620.5p.