Utilities gain ground on hopes of US takeovers

MARKET REPORT

Even with New York closed for Labor Day, US influences dominated much of the stock market action.

Stories flowing across the Atlantic of possible corporate action enlivened what would have been a dull session with Norweb, the electricity group, leading the charge, up 37p to 933p, a peak.

The market is convinced that US utility groups are about to descend on UK electricity and water companies, following the example of the Southern Co which is acquiring South Western. Houston Industries is one rumoured predator, Pacific Gas another.

Thorn EMI was another to enjoy a US nudge. Viacom, which appears to be adopting a more upbeat presence in London, was said to be contemplating a bid, ahead of the planned demerger. It was enough to lift Thorn 30p to 1,525p.

Mercury Asset Management, the fund manager now freed from the restraints of Warburg control, edged quietly ahead to 907p, a peak, in brisk trading. A US strike is thought to be near with Merrill Lynch, which recently captured Smith New Court, one of the names in the frame.

Union, once a famed discount house, was another subject to US influences. The shares were at one time up 15p, closing 12p firmer at 115p, a year's high. Suggestions that a US house failed in an attempt to pick up 5 per cent of the capital late on Friday created the excitement. Union has been under the whip of speculation for some months. Cater Allen and Guinness Peat are the favourites to pounce.

Dobson Park, the components group which has received - and rejected - a US offer jumped 28p to 111p. Instem, a computer group where Dobson has a 30 per cent interest, rose 4p to 140p. Should the US bidder, Harnischfeger, succeed in taking over Dobson it will almost certainly sell the Instem stake, a move that could put the company into play.

The Americans did not have a monopoly on takeover chatter. From Holland came a story that Reuters and Reed could merge; Reuters gained 19p to 583p and Reed 20p to 1,010p.

The swirling takeover speculation occurred on an exceedingly quiet day, with trading at a low ebb. A New York shut-down often inhibits activity so there was considerable satisfaction that the market managed to make headway with the FT-SE 100 index up 13.3 points to 3,522.7.

However, the downbeat tone - Rugby and CRH yesterday - which is becoming evident in more company state- ments as the results season gathers pace is causing some concern.

Pearson, the banking and publishing group, put on 12p to 620p ahead of an evening investment presentation.

Today Pearson hopes to receive approval from its shareholders to sell its 9.75 per cent shareholding in the BSkyB satellite television group. The sale should give BSkyB a sufficiently wide spread of shareholders to allow the TV group to become a Footsie constituent. The FT-SE committee is due to meet tomorrow and - if Pearson's stockbrokers, BZW and Goldman Sachs, place the shares before the committee deliberates - BSkyB will join Footsie later this month. But should the placing be delayed the TV group will probably have to wait until December.

Rolls-Royce, after last week's disappointing figures, rallied 7.5p to 177p after it embarked on investment meetings. GEC rose 4p to 321p with Warburg positive. Grand Metropolitan said to near to making a big disposal, gained 7p to 416p.

Bid excitement erupted again among TV shares. Talk that Scottish TV intended to descend on HTV lifted the shares 12p to 246p; Grampian, also said to be a Scottish target, rose 13p to 215p.

Worries about raw material prices lowered British Vita 23p to 243p and Sunset & Vine, a media group, slumped 23p to 109p after a profit warning. Cautious comments clipped once high-flying Bluebird, the toys group, 18p to 224p.

Retailers were firm on the mortgage rate cuts with Next climbing 10p to 400p.

On AIM, Antonov was again in top gear, up 18p at 138p. Graduate Appointments, a recruitment agency controlled by Maurice Saatchi and his wife, Josephine Hart, arrived on the fledging market, jumping from a 4.2 price of 18p to close at 27p. Tracker Network, which has developed a system that helps police trace stolen cars, was also upgraded, gaining 100p to 775p in the process.

Casket, the troubled cycle group expected to collect a bid fell 1p to 7.25p, thought to be in line with the take-out price.

Financial group Johnson Fry rose 12p to 140p.

TAKING STOCK

o Budgens, the supermarket minnow, came to life with the shares gaining 1.5p to 36p in busy trading. Speculation continues about the fate of a 29.4 per cent stake held by the German food retailer, Rewe. The Germans are keen to sever their links with Budgens and there have been suggestions they are on the verge of selling to the Co-op. Earlier this year Rewe attacked Budgens for abandoning its Penny Market concept after a two-year experiment.

o Alliance Resources, John O'Brien's little oil and gas group, has been hit by nervous selling. The shares were at one time down to 4p yesterday; they closed, in busy trading, at 4.75p, off 1p. Last year the price was around 12p. It seems at least some of the selling stems from worries about some of Alliance's US interests.