STOCK MARKET WEEK : Dilly-dallying Footsie gets off the fence and chase s Wall Street

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The Independent Online
After limping along for more than two months blue chips have suddenly displayed the type of enthusiasm that sent New York rocketing to new highs.

The gap which opened between the FT-SE 100 index and the Dow Jones Average mystified many stock market players. For a time the Dow seemed capable of producing record-breaking performances with infinite ease while Footsie, until last week, dillied and dallied.

But perhaps too much attention, is paid to Footsie; after all, the supporting index, which covers the 250 shares that come after the 100 blue chips, has been hitting new peaks with monotonous regularity.

It could be argued that supporting shares are less worried by political uncertainty and experienced the so-called feel-good factor before their more illustrious colleagues. Are they, then, with their broad spread of interests, a far better reflection of the stock market than blue chips? Even if they are there is no likelihood of Footsie, with its huge capitalisation, being replaced by the second-liners index.

Observers will continue to use it to plot the market although there must be a strong case for more attention being paid to the little used FT-SE 350 index, embracing the two main indices. It stretched to new highs before Footsie's belated response last week.

A week, as Harold Wilson so famously pointed out, is a long time in politics - it is also a long time in many other areas, including the market.

A week ago, although the bulls were gathering, there seemed little to suggest blue chips would pick up and suddenly stride to new highs.

Although the political outlook remained hazy, encouraging economic data and a rush of takeover speculation drove shares forward.

The astonishing descent on National Power, which had not been seen as a takeover play, was the big influence; the shares of Britain's largest generator jumped by 100p to 592p over the week with one investor prepared to pay 620p.

The arrival of Southern Co, the US predator, underlined the feeling that a rush of corporate action was due before the market got around to worrying about the election and what the Labour Party's real attitude would be towards the City and the bid industry.

The Conservatives' dismal showing in the Staffordshire South by-election must, the market reasoned, sharpen the desire of any predator to get a deal done and dusted before any chance of New, or even old, Labour interference.

The past week has strengthened the bulls' claim that Footsie at 4,000 points is not far away. A few takeover bids - Ladbroke, Lucas Industries, London Electric and Thorn EMI? - would provide further inspiration; so would firm developments in the NP/Southern and BT/Cable & Wireless adventures.

Retail sales for March will be assiduously studied. It is hoped they will confirm the upward trend signalled by the Confederation of British Industry, which gave retail shares such an uplift last week. NatWest Securities is looking for a repeat of February's 0.6 per cent increase. The CBI's industrial trends survey and the response to the Government's pounds 3bn gilts auction will also be important indicators this week.

With the emphasis on retailing for the second week running it is appropriate that Sears, the conglomerate created by the legendary Sir Charles Clore and taken apart by his successors, should feature in the results parade.

Sears is one share missing the market party. Before the 1987 crash it touched 175p. It is now below 100p and last week an institution was prepared to dump shares at 94p.

Pressure is mounting on Ulsterman Liam Strong, the chief executive drafted in from British Airways, to deliver the goods. He has undertaken a stream of disposals which can only distort the year's figures, due tomorrow. Normalised profit could be around pounds 103m, down from pounds 139.6m but the headline pre-tax return could be nearer pounds 65m.

Austin Reed is another retailer on the rack. Profits are expected to have nearly halved to not much above pounds 3m, a development that will not strengthen the clothing chain's defence should one of the rumoured predators - Burton and Moss Bros are the favourites - decide the time is ripe to strike.

Bentalls, the Kingston-upon-Thames department store, and the Etam fashion chain are other retailers likely to record profit falls but Essex Furniture, DFS Furniture and JJB Sports are expected to have made headway.

Eurotunnel, with year's results today, will no doubt have another disastrous tale to tell. A loss of pounds 700m and more pressure from its bankers is expected. But Associated British Foods, announcing interim figures today, is expected to produce a further example of its steady growth, with pounds 181m against pounds 165m. The group is cash-rich and could be tempted into a share buy-back or even a special dividend.

The view is it will not raid its cash hoard to mount a big bid, but remain content with modest, bolt-on acquisitions.

Bank of Scotland, due to report on Wednesday, is another on the market's ever- lengthening hit list. But the shares have fallen from grace as any takeover has failed to materialise and the group, despite an expected 22 per cent profit increase to pounds 550m, has found trading tough.

The week's results are rounded off by Joseph Holt, a family-run Manchester brewer. A cost-conscious company with some of the cheapest beer prices in the country, Holt's shares are standing at an exceedingly rich pounds 34.25p each, giving a pounds 105m capitalisation.

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