Strong surge by generators brightens up dull trading

MARKET REPORT

It was the turn of the gencos to brighten a dull stock market. National Power and PowerGen surged ahead, basking in an array of analytical approval. And to add to the activity, there was, just for good measure, a hint of takeover action.

Morgan Stanley, the US investment house, was the first to descend on the generators. Then last week UBS was wrong-footed when word leaked it was preparing a favourable circular and the investment house felt obliged to rush out its comments ahead of schedule. Goldman Sachs has also joined the applause, producing its own buy note.

So the generators, for long neglected and in urgent need of a little friendly support, happily responded. National Power, the best performing blue chip, surged 16p to 417.5p; PowerGen rose 13.5p to 534p.

Both stocks offer strong yield support, an ideal requirement in what is looking an increasingly uncertain market. National Power offers a 7.1 per cent return; PowerGen is on 5 per cent.

Adding a little strength to what, in investment terms, are a couple of dull shares are suggestions one of the oil giants could strike.

Shell, or perhaps British Petroleum, are seen as possible predators and if a strike is planned it would, in view of the political situation, be wise not to delay too long.

The rest of the market drifted aimlessly with Footsie ending 7 points lower at 3,921.1 as once again investors held off, ahead of the US presidential election result. Talk of higher interest rates, another rampant display by sterling and disappointing Marks & Spencer figures added to the restraint. Even a bright Government stocks market, with gains of up to three quarters of a point, and a strong New York opening failed to offer any comfort to equities.

The growing confusion over the Crest computerised settlements system was said to be an unsettling influence.

A more cautious equity stance - from overweight to neutral - by Merrill Lynch also contributed to the lacklustre display.

British Airways was one of the few to ignore the market slipstream, climbing 18.5p to 568p as US buyers moved in after the quarterly results. Growing hopes the link with American Airlines will get Whitehall approval and BA's near certain success in winning control of the French Air Liberte operation were other decisive influences.

Vodafone was again at the call of takeover speculators following BT's pounds 13bn spectacular for MCI, the US group. Its shares, with SBC Warburg saying buy, put on 4.5p to 246p; BT lost 3p to 370p. Cable & Wireless fell 4p to 379.5p following results from its Hong Kong Telecom off-shoot.

M&S ended 26p lower at 483p and Whitbread's figures, although encouraging its rivals, failed to offer any stimulant to its own shares, off 4p at 736.5p. Allied Domecq, results next week, rose 7p to 481.5p and Scottish & Newcastle 5.5p to 648.5p.

Dixons improved 5p to 549p as NatWest Securities upgraded its profit forecast by pounds 15m to pounds 195m and English China Clays rose 6.5p to 192.5p on ABN Amro Hoare Govett support.

Johnson Matthey, the metals group, fell 19p to 573.5p after UBS placed 3.5 million shares at 575p. Large lines in Zeneca, down 16.5p to 1,627.5p, and Lloyds TSB, 3.5p to 383p, were said to hover.

In busy trading, BSkyB firmed to 548.5p with Lehman Brothers making cautious noises.

The US securities house puts a 481p valuation on the shares. News Corporation completed its preference issue based on BSkyB shares.

British Biotech, at one time down 15p, ended 5p lower at 202.5p after rumours of a positive meeting with fund managers.

Alpha Airports edged 1.5p higher to 105.5p as the long-suspected sale of Granada's 25 per cent interest duly occurred with Harrods chief Mohamed Al Fayed paying 125p a share for the stake. He has no plans to bid for at least six months. There are suggestions BAA, the airports group, could join Mr Al Fayed in developing duty-free operations through Alpha.

Fairway, a printing group, fell 28.5p to 81.5p on a profit warning and a trading update failed to inspire First Leisure Corporation, which was off 9p to 360.5p.

The resumption of hostilities over Lloyds Chemists left the shares 5.5p lower at 511p.

Michael Page, the recruitment group, held at 422.5p with Merrill Lynch looking for an pounds 11m profit increase to pounds 28.7m this year. The investment house sees pounds 33.4m next year.