Footsie surges amid suspicions of another mega-bid

MARKET REPORT

A dead cat bounce - or is the stock market recovering from this month's nervousness?

The FT-SE 100 index surged 41.5 points - its biggest gain for nearly two months - to 3,681.8.

Trading was often busy with turnover topping one billion shares. Unchanged German interest rates failed to lower the temperature and the market was happy to dwell on what was seen as an encouraging batch of company results.

But Footsie is still 100 points below its peak and there is no doubt some confidence seeped away in the run of reverses.

Takeover talk played a big part in the upsurge. Two bewhiskered favourites, Ladbroke and Zeneca, led the field.

Zeneca climbed 58p to a 1,402p peak. Almost every leading drugs group was named as a possible predator as rumours swirled of an imminent strike.

Glaxo Wellcome, known to be seeking a big acquisition, and Roche, the Swiss giant probably feeling in need of a deal following the creation of Novartis as the world's second largest drugs group, were seen as the main contenders for a Zeneca swoop.

But sources close to Glaxo, up 22p to 826p after its recent dismal run, were inclined to dismiss the possibility of a Zeneca bid.

Ladbroke gained 12p to 189p in brisk trading. Bass, the brewing group, was the favourite to strike although Whitbread and the US Hilton Hotels Corporation were also mentioned as candidates.

The persistent rumours swirling around Zeneca and Ladbroke could merely stem from intelligent speculation. After all, both groups are vulnerable. But the frequency of the raids and on occasions the determination of the buyers make veteran observers believe corporate action is not far away.

Much the same could be said about Standard Chartered, the banking group. It continued to recover, stretching 15p to 601p with Barclays de Zoete Wedd making positive noises after meeting the group.

Two other banks where the odd takeover whisper has been heard - Bank of Scotland and Royal Bank of Scotland - made headway. So did the bid favourites in the insurance industry. Royal Insurance, for example, gained 9p to 349p.

The suspicion that more mega-bids are in the system is growing. The market believes that because of the political situation any predator would be wise to make sure any bids are done and dusted by the autumn.

Since Granada's pounds 3.9bn offer for Forte the expected takeover feast has failed to materialise; the market has had to be content with such modest offerings as a pounds 904m bid for Trafalgar House and a possible pounds 900m shot for South West Water.

Enterprise Oil (33p to 420p); Reckitt & Colman (34p to 655p) and BTR (13.5p to 335.5p) were other Footsie constituents to move ahead, drawing strength from results. Rolls-Royce (9p to 213p) was helped by a Henderson Crosthwaite buy recommendation.

GEC, on growing talk that the successor to chief executive Lord Weinstock will be known next week, gained 11.5p to 365p. George Simpson of Lucas Industries remains the favourite to get the job.

Mirror Group Newspapers climbed 11p to 225p following results and the Daily Mirror price increase; figures lifted Logica, the computer group, 18p to 533p.

Securicor "A", the non-voting shares of the security group, added 33p to 998p on ABN Amro Hoare Govett backing. The voting shares held at 1,605p but Security Services, controlled by Securicor, gained 25p to 998p..

British Petroleum continued to score from its analysts' meeting; gaining a further 5.5p to 551p. There was action among the smaller oil shares. Tullow, where there has been talk of a British Gas bid, gained 2.5p to 78p with rumours of another strike flowing, and Monument Oil & Gas was buoyed by bid speculation, gaining 1p to 67.5p.

Hotspur, the investment trust where a revamp is underway, improved a further 13p (after 63p) to 713p.

Mayflower, the specialist engineer, rose 1.5p to 100.5p following figures ahead of expectations and Jeyes, the disinfectant group, celebrated a swing back into profits with a 14p gain to 133p.

Lonrho added 6p to 208p on the Anglo-American involvement and Vodafone, the mobile telephone group, improved a further 2.5p to 252p ahead of a New York investment presentation next week.

Memory Corporation, developing a system for repairing defective computer chips, continued to be haunted by its profit warning, off 18p to 135p. Prime People, the recruitment group, rose 1.5p to 6.5p on talk of corporate activity.

TAKING STOCK

rThere is a buzz of activity in the hotel industry. MacDonald Hotels, owning 16 mid-market properties, made a strong market debut, reaching 180p from a 145p placing. Two hotel groups are due soon, Millennium & Copthorne and Cliveden; Jarvis Hotels and Thistle Hotels are also near to seeking quotes. Thistle, controlled by Brierley Investments, which paid over the odds for the chain in 1990, is thought to be hoping to buy some of Forte's trophy hotels, put up by sale by Granada.

rBrancote, a mining exploration company, held at 56p. Its rights issue for pounds 3.2m at 50p a share closes on Tuesday. The exercise will increase Brancote's institutional support. The company wants the cash to participate in a copper project in Australia.