Reduction in mortgage rates sparks late buying spree

Market report/shares

Shares staged a strong recovery, inspired by Abbey National's surprise mortgage rate cut and an opening burst of enthusiasm in New York.

The FT-SE 100 index jumped 31.6 points to 3,509.4, with the supporting 250 index hitting a year's high of 3,931.8. Government stocks gained more than a point.

The Abbey move supported the growing market view that with Continental and US rates under pressure the next base rate move will be downwards.

September is regarded in many quarters as an uninspiring month for shares but hopes are riding high that lower interest rates will provide a trading fillip this year.

Trading was not heavy, although the market produced a host of stories for investors to feed on.

Takeover action among retailers was high on the gossip agenda. WH Smith remained in the frame, up 5p at 391p, with even Dixons and Thorn EMI joining Asda among the rumoured candidates to bid.

Dixons jumped 16.5p to 352.5p and Thorn, said to be largely interested in Smith's bookselling side, rose 17p at 1,495p.

Lloyds Chemists continued to make headway, up 5p at 257p, with a Tesco deal - a bid or a pharmacies link - the uppermost rumour. Tesco gained 4.5p to 331p.

The retail excitement was helped by heavy option trading in Dixons and buy recommendations for the electrical retailer from NatWest Securities and SBC Warburg.

There is a continuing strong feeling that corporate activity is about to break out among retailers. At the moment the market seems to be thrashing around, desperately seeking evidence to support what is so far no more than a basic instinct.

It is nursing similar thoughts about the cider makers. Matthew Clark, the Gaymers group, is thought to be looking for a deal with HP Bulmer or Taunton Cider said to be in its sights.

Taunton, helped along by an upbeat shareholders' meeting, put on 5p to 184p and little Merrydown, which could also be involved, rose 5p to 131p. Bulmer (488p) and Matthew Clark (669p) were unchanged.

Standard Chartered, the banking group, was the best-performing blue chip, up 22p to 454p, as Cazenove and Warburg made positive noises. Caz was said to have nudged its profit forecast up to approaching pounds 600m, moving into line with most other estimates.

HSBC, with Warburg leading the way, and Schroders - Cazenove again - were also firm. Schroders, a popular take over subject, gained 25p to 1,478p. Interim figures are due on Friday.

HSBC, which attracted a Caz upgrade earlier this week, gained 27p to 895p.

Electricities were again in demand on takeover hopes but waters sank as the implications of the water shortage nagged at confidence.

Housebuilders and related shares had another difficult session despite reported support form UBS. Blue Circle Industries jumped 15p to 334p. Interim figures are due next week. About pounds 105m is expected against pounds 88.4m.

Dobson Park, a components group, held at 83p. A US group, Harnischfeger, has made a bid approach. It wants to merge its mining equipment side with Dobson's joint venture, Longwall. Ferry Pickering, a packaging and printing group, said it had rejected a bid approach.

The shares rose 7p to 155p. They have climbed from 125p in the past few weeks.

Anagen, with marketing approval from the US Food and Drug Administration for two more aspects of its Auraflex testing system, jumped 27p to 89p.

On AIM, Antonov's remarkable progress continued. The shares gained 11p to 120p with some talking about a deal for the company's new-style gearbox being set up at the Frankfurt Motor Show later this month. The shares probably embrace the biggest hope factor in the market.

Antonov's development has yet to be proven and it has still to win the support of a large car maker. The shares were floated at 40p in May.

Dawson International, the struggling textile group, held at 128p. Stockbroker BWD Rensburg rates them a buy as the new management gets to grips with the group. It expects Dawson to get back into profits with pounds 11.1m this year and hit pounds 13.5m next.

Danka Business Systems shot ahead 46p to 506p with talk it is about to pounce on Eurocopy, up 1p at 101p, creating the excitement.

Central Transport, Tiphook as was, fell 3p to 34p after it said the strong US dollar had left it with negative net worth. Mackie International, the Ulster engineer, rose 32p to 379p. Figures are due on Monday.

Estate agent Hambro Countrywide held at 36p. Smith New Court says the next two years look grim and the shares are "option money".

TAKING STOCK

o Expect action at Platignum, the furniture, houseware and stationery group. There is talk of a substantial acquisition and rights issue being announced soon. The group, which has an uninspiring record, has a stock market valuation of around pounds 2m with its shares at 8p, up 0.5p.

Ahead of the 1987 crash they were almost 250p. Last month in a boardroom shake-up chief executive Rob Campbell and finance director David Bridge quit.

o Kenmare Resources has stumbled on what could be a promising gold reserve in Mozambique where it has graphite interests and is hoping to develop a mineral sands operation with BHP, the Australian giant. The shares, up 0.5p to 19.5p, are at their highest for four years; they have more than doubled in a year.