THE SHADOW of Lloyds TSB loomed large over a wayward market yesterday amid talk that the banking giant is lining up two major deals.
As the index swung like a yo-yo throughout the session, dealers were excited by talk that Lloyds could have a pop at life assurer Legal & General, up 7.25p to 155.75p, and then attack one of the former building societies, possibly Northern Rock.
Traders said that cash-rich Lloyds could pay up to 200p per share for L&G - valuing the insurer at over pounds 10bn - without breaking the bank and, still pay around pounds 2bn for a mortgage lender.
Supporters of the somewhat wild story denied suggestions that they had been affected by the Square Mile's sweltering heat and pointed to the share price movements of both L&G and Lloyds.
The insurer was one of the day's biggest risers and was also one of the most actively-traded stocks in the market, with over 11 million shares changing hands.
Lloyds' gyrations also lent some credibility to the rumour. The bank started easier as whispers of the audacious double-bid triggered fears of a fund-raising exercise. However, the bank ended 15p better at 817p as buyers warmed to the strategic significance of the mooted double whammy.
The acquisition of L&G and Northern Rock would considerably boost Lloyds's presence in both the pensions and mortgage markets. Coming a few months after the purchase of Scottish Widows, the twin strike could turn Lloyds into the undisputed leader of the UK financial services market in one fell swoop.
The only chink in the rumour's armour was a 12p slide in Northern Rock's price to an all-time low of 432p. However, optimistic traders turned even the fall to their advantage and said that Northern Rock's nadir could encourage a predator. An alternative target, L&G's rival Norwich Union, firmed 5.25p to 407.75p after a push from broker DKB.
The rest of the financial sector was also in demand, thanks to stellar results from HSBC, up 26.5p to 765p. Fellow Hong Kong bank Standard Chartered soared 54p to 990p in sympathy. Schroders was untouched by this Far Eastern promise but still rose 58p to 1,442p on revived rumours of a split between its fund management and brokerage arms.
The FTSE 100 closed 56.4 higher at 6,288.3 after a see-saw day. The blue- chip index plunged as much as 75 points in the morning as a strong manufacturing survey deepened fears of a domestic rate hike and Friday's fall on Wall Street triggered worries of monetary tightening across the Atlantic. However, London recovered in the afternoon when a weak set of economic data in the US eased the rate-hike jitters and sparked a three-figure rise in the Dow.
The UK-oriented undercard failed to profit from New York's bullishness and the FTSE 250 ended a mere 0.6 higher at 5,970.1, while the Small Cap was up 2.5 to 2,719.1.
Takeover talk kept the telecoms lines busy. COLT Telecom rocketed 89p higher to 1483p amid revived rumours of a bid from a European player such as Deutsche Telekom.
Another mooted Deutsche prey, Energis, rang up a 42p rise to 1,690p as brokers praised the pounds 60m acquisition of European network provider Unisource Carrier Services.
The telecoms equipment maker Filtronic bucked the trend and plummeted 163.5p to 656.5p after house broker WestLB Panmure slashed this year's profit forecast following dull numbers.
The drinks sector was also awash with bid speculation. The newly-named New Allied Domecq jumped 16p to 571p on talk of an offer from overseas, while old chestnut Greenalls frothed 15.5p higher to 358.5p on whispers of a strike from Nomura, Whitbread - 6p higher to 869p - or both. Whitbread is also talked of as a suitor of hotel group Swallow, up 6.5p to 305.5p, after buying London's Regent Plaza Hotel.
Retailer GUS jumped 21p to 654.5p after non-executive director Alan Rudge bought 1,500 shares at 25p, while BAT puffed up 15p to 535p on optimism about today's results.
Different story for Shell. The oil giant drilled 11.25p lower to 492.25p as the bears talked down Thursday's interims. Oil explorer British Borneo rose 6p to 231p in big volume amid talk of an important discovery.
In the midcap, rail engineer Jarvis steamed 45p ahead to 329p on persistent talk of a pounds 400m contract win. Car parts maker Mayflower soared 18.5p to a five-year high of 252p for two reasons: today's results are set to please and a big deal is believed to be in the pipeline. Fellow engineer TI, interims on Thursday, climbed 7.5p to 470p, on growing whispers that a big merger is near.
Croda International, the chemical group, firmed 9.5p to 322p on revived bid rumours, just like rival Burmah, 32p higher at 1,305p.
Computer services provider Logica logged on to a 32.5p rise to 705p as JP Morgan started coverage on a positive note. No such luck for Rank, down 14p to 289p on fears Thursday's interims will bring a dividend cut.
Small Net companies were active. Gameplay.com, a producer of online games, debuted on AIM with an 86p jump to 221p. StartIT.com, a vehicle to invest in small Internet and IT companies, could follow its example when it lists on AIM today.
Ofex-traded NetBet, an Web-based bookie, jumped 10p to 290p after completing a pounds 1.5m placing, signing a Japanese joint venture and changing its name to sportingbet.com.
The leisure group ENIC rose 11p to 127.5p amid whispers that a deal with bookmaker Victor Chandler is near. Rumours of a US buy by Chandler are also around.
Freeserve, the mother of all Internet stocks, put on another 6.5p to 244p as buyers continued to pile in.
Media big hitter Pearson was also excited by Internet talk. The stock jumped 43p to 1,299p after the group accompanied good figures with a pledge to spend pounds 120m on Web-based businesses.
The engineer Turnpyke Group was the pick of the minnows, soaring 3.25p to 5.5p on its return from suspension following the reverse takeover of imaging group Fairfield.
Drug group SkyePharma shot 1p higher to 53.75p as a deal with a pharmaceutical major is thought to be near.
Among the losers, software group Total Systems plunged 9.5p to 46.5p as the millennium bug decimated first-quarter orders, while financial tiddler DBS Management shed 26p to 158.5p after ending talks with a suitor.
Office furniture maker Black Arrow was moved 11p lower to 84p after admitting that profits had been hit by the Asian turmoil.
SEAQ VOLUME: 869.7m
SEAQ TRADES: 73,897
GILTS INDEX: 106.01 -0.48
RYANAIR could be close to hitting a bit of turbulence. According to some bearish rumours, the Irish budget airline could suffer from a expected hike in landing fees in some of its airports.
Some investors are worried that the increase in costs could put pressure on Ryanair's cashflow and profitability and offset a recent increase in the number of passengers carried. These fears are starting to take their toll on the shares, which yesterday closed 1p lower at 632.5p.
SOME CUNNING investors are keeping a close eye on the price rise in IMS Group. The operator of telephone call centres yesterday hit an all-time high of 320.5p after jumping 25.5p. Rumour has it that one of the telecoms big boys is building a stake in IMS with a view to exploiting its Internet potential. Traders speculated that a company such as Energis could be the mystery stake-builder and that the stake could be near the 3 per cent disclosable threshold.
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