Blue chips move ahead as fears of US rates hike recede

A strong start on Wall Street brought the buyers out in London where the Footsie climbed back above 3,700 in active afternoon trade. The index ended up 34.7 at 3703.2, just below its best level for the day, as fears of a rise in US interest rates receded. Volume was a healthy 784 million shares.

Bid rumours returned to Thorn EMI ahead of its planned demerger in two weeks. Speculation centered on a suitor emerging for the EMI music business, though dealers also mentioned good first-quarter figures from Japan's Sony as a reason for the 51p rise in the shares to 1,753p. Names in the frame this time round included Canadian entertainment giant Seagram and MCA, which may be amassing a war-chest after recently selling film rights to two German media companies

Best blue chip of the day award went to BAT Industries, 22p firmer at 504p, after the tobacco giant turned in a better-than-expected 12 per cent increase in half-year profits and raised the dividend by over 8 per cent.

But even BAT was eclipsed by Stagecoach, still a second-line stock, as the City warmed to the bus and rail operator's plans to buy rolling-stock leasing operation Porterbrook for about pounds 476m. Analysts see earnings per share up by 15 per cent in 1997 and 18 per cent the following year if the regulatory authorities give the deal the green light. The shares soared to an all-time high of 542.5p, up 60.5p.

Not to be outdone, motor distributor Cowie followed in England striker Alan Shearer's footsteps by going back to its Geordie roots with the pounds 24.5m acquisition of North East Bus. The deal, following hard on the heels of its British Bus purchase, takes Cowie to number two behind First Bus in the UK bus market with an 18 per cent share. Cowie closed a penny off at 373p.

Northern Ireland Electricity fell 53p to 353p in heavy trade of 1.15 million shares after the industry regulator ordered bigger-than-expected price cuts, which the company said would have "very real constraints on resources". Douglas McIldoon, director general for electricity supply for Northern Ireland, said prices should be cut by 31 per cent next year and annual increases limited to 2 percentage points below inflation. Investors expected a 20 per cent cut.

Thames Water also failed to make a splash, closing 5p adrift at 540p after announcing plans to buy back 10 per cent of its issued share capital. Almost 85 million shares changed hands.

Glass maker Pilkington was also a weak trade, retreating 8p to 182p after chairman Nigel Rudd told the annual meeting that continuing difficult trading conditions in Europe would result in "somewhat lower" profits for the six months to September 1996.

Exhibitions group Blenheim make further headway, 33p better at 425p, on reports that publisher Reed is interested in competing with United News & Media for the company. United slipped 7p to 622p, but Reed gained 14.5p to 1,083p. Allied Domecq added 10p to 448p as the market awaited more news about the sale to Bass of its 50 per cent stake in brewer Carlsberg- Tetley.

Shares in Greene King were frothy after NatWest made positive remarks. They closed 25p better at 610p.

Insurance brokers Sedgwick and Willis Corroon attracted negative comment from Nikko Europe ahead of interim results. Nikko argues the market for large, full-service brokers is overcrowded, leaving little scope to grow dividends. Sedgwick added a penny to 124p, while Willis Corroon closed a penny lower at 140p. Elsewhere in the sector better-than-expected interims pushed shares in Guardian Royal Exchange ahead 9p to 243p.

Shares in Liverpool-based electrical retailer Colorvision were suspended at 21p after the receivers were called in. A new management team led by former Wembley boss Sir Brian Wolfson came on board in May but sales failed to recover to anticipated levels, leaving the company unable to trade within its banking facilities.

European Colour, the Stockport-based paint pigment manufacturer, was steady at 80p. It is paying pounds 13.4m for Tor Coatings, a Newcastle-based manufacturer of speciality coatings incorporating anti-graffiti and fire resistance features. The cash and shares deal, which increases group pre- tax profits by a half, should enhance earnings in the first year. On house broker Credit Lyonnais Laing's raised forecasts the shares stand on a forward multiple of 13 falling to 11 in 1998.

Over the Pennines, Yorkshire Chemicals advanced 14p to 244 after NatWest said the shares looked oversold.