Market Report: Second liners continue to scale new peaks

IT WAS a market of two halves; blue chips marked time as mid and small cap shares stretched to new peaks.

The euro's difficult birth, with the attendant worries of higher European interest rates, quickly killed off an early blue chips' advance but the rest of the stock market was in fine form.

The FTSE 250 index ended 29.3 points higher at 5,682.3 and the SmallCap index improved 8.4 to 2,665.3.

The day's performance was a continuation of a trend which started in late January. Until then Footsie constituents romped ahead, creating a huge value gap with the rest of the market, which seemed destined to drift aimlessly.

The undercard rally has been dramatic and many experts believe the second and third liners, helped by the arrival of new market-makers, will continue to move ahead.

Footsie scored an early 54.3 gain. It was an unrealistic mark up, prompted by New York's record high. Buyers stayed away. Blue chips went into reverse and, by the close, Footsie was down 23.8 at 5,986.5.

The weaker pound continued to help exporters with British Steel up 5.5p to 167.5p and GKN 40p at 1,778p.

PowerGen, the generator, was at one time 33p higher as the market built on the takeover inspired rise. The shares ended at 825p, up 18p.

The group is thought to be in talks with Houston Industries, although any deal could be some months away. PG is keen to find a US partner; there has been talk it was in negotiations with another US group, Cinergy, a Cincinnati electricity group. Houston has made no secret of its British ambitions and even bid unsuccessfully for Norweb.

Surprisingly, PG felt the talks, which it did not deny, did not deserve a statement. A spokeswoman said: "We see no requirement to make a statement. The share price movement isn't that exaggerated and you have to remember it follows a dip over the last couple of weeks." Keeping shareholders informed is, apparently, way down PG's list of priorities.

BT improved 4.5p to 663.5p with Bankers Trust suggesting the price should be 700p.

Demerger hopes lifted Hillsdown Holdings 6.5p to 186p and Christie International, the auctioneers, responded to Joseph Lewis' departure with a 13.5p gain to 296p. The Lewis 29 per cent stake has gone to Artemis, a French investment group run by Francois Pinault.

Music group Boosey & Hawkes' reorganisation, which killed hopes of a bid following the Carl Fischer retreat, was greeted with a predicable off-key response - a 137.5p fall to 637.5p. Last year, on hopes the Carl Fischer withdrawal would prompt a bid for full control, the shares touched 1,062.5p.

Cliveden, the upmarket hotel group, gained 12p to 91.5p after duly confirming a bid approach. Hanover International, long regarded as a bid target, put on 6p to 139.5p.

The excitement engulfed Thistle Hotels where Brierley Investments, reconsidering its investment policy, sits on 46 per cent. The shares improved 9.5p to 186.5p.

Brierley is thought to be unhappy about its Thistle involvement and, indeed, the chain's weak share performance. It could be prepared to sell out, which could leave the company wide open to a bidder.

CSFB, the old BZW, helped the Thistle growth by moving its stance from hold to buy.

H Young, the distributor, firmed 2p to 152.5p after splashing out pounds 5.1m for Leeda, the nation's largest distributor of fishing tackle, and pounds 1.4m for Powerline, a branded power supplies group.

JWE Telecom made a ringing debut, closing at 125p against a 103p placing. On Ofex, Appian Traffic Technologies, placed at 20p, closed at 35p. It is the 200th company to be listed on the fringe market.

The football ups and downs had an impact. Tottenham Hotspur's Premiership survival lifted the shares 3p to 72.5p. Again on Ofex, Arsenal lost an early pounds 100 gain to settle unchanged at pounds 2,800. But Manchester City fell 10p to 85p.

Aspen, a marketing and specialist printing group, fell 11p to 101p as expected bidder, US group Quaestus, decided to walk away. Last month Photobition failed to agree a takeover.

AEA Technology firmed to 721.5p as Panmure Gordon put an 860p price on the shares.

Arriva, the transport group, hardened to 424p with 2 million shares changing hands, a deal which could signal the end of a selling programme. Investment meetings are planned this week.

Aukett, an architect, gained 1.75p to 8.25p after gaining orders worth pounds 100m, which add up to pounds 3.5m in fees.