Interest rate pressure powers Footsie to new peak

MARKET REPORT

After a four day pause blue chips recaptured their record breaking form. In often busy trading the FT-SE 100 index surged 34.9 points to 3,570.8 - a comfortable 13.1 ahead of the previous peak.

Once again it was the mounting pressure for lower interest rates which galvanised the stock market. A US cut is now expected later this month and with Kenneth Clarke winning the protracted debate with Eddie George a downward move on this side of the Atlantic will, it is widely thought, not be far behind.

Encouraging economic figures contributed to the air of optimism and a round of largely favourable company results -where Kingfisher and Prudential set the pace - provided an extra bonus.

With sterling strong, New York embracing new highs and Government stocks ahead there was, it appeared, a surfeit of goodies for the market to absorb.The euphoria was, however, again concentrated on the leaders. The supporting FT-SE 250 index, up 8.6, was shy of its year's high and 174.3 below the peak, achieved in February last year. However since last week's record the second liners have shown some signs of narrowing the gap with blue chips.

Spirit shares were among the day's best performers. The first, hesitant signs that the long decline in Scotch whisky demand was ending prompted their high spirits. Guinness, with interim figures due later this month, added 7p to 527p. Analyst Victor MacColl at stockbroker Raphael Zorn Hemsley is looking for pounds 346m against pounds 320m. Allied Domecq managed to shrug off its brewing blues with a 7p gain to 534p and Grand Met was 5p stronger at 425p. But spirit shares have a lot of leeway to make up. They have sadly underperformed the rest of the market as the recession has cut into profits. For example Guinness hit 629p in early 1992.

The Pru, up 20p at 356.5p, led the blue chip leader board, dragging other insurers higher. Kingfisher improved 19p to 483p as the market produced a huge sigh of relief that the figures, although awful, were above worst expectations.

Supermarkets, hit on Tuesday by talk of price wars, picked up again, with BZW rallying to support the sector. But there was, unusually on such an upbeat day, no shortage of casualties. P&O was in choppy waters, off 9p to 537p on worries today's half year figures will be accompanied by a rights issue. There was also apprehension about the impact of the cross channel price. BAA, the airports group, was unsettled by lower than expected August traffic figures with Eurostar competition evident. The shares fell 9p at 523p.

Cable and Wireless remained subdued on the departure of Duncan Lewis and Hanson's decline continued. Berisford dropped 20p to 164p as ABN Amro Hoare Govett cut profits estimates - from pounds 29m to pounds 25m and pounds 44m to pounds 35m. Trading at its Magnet kitchens operation prompted the revisions.

David S Smith, the packaging group, was back in the takeover frame, up 20p at 629p. Parkside International, another packaging group, jumped 25p to 76p as it revealed a bid approach. Last month the shares plummeted 38p on a profit warning. Fine Decor, the wallcovering group which has said it is in talks, put on a further 17p at 161p and Danka jumped 35p to 590p as it moved to take full control of Infotec, a Dutch group ranking as one of Europe's largest photocopier operations. Danka is one of the likely bidders for Eurocopy, up 1p to 99p.

Banks were firm with NatWest up 14p to 614p on stories it was near to selling its US operation, NatWest Bancorp. With the American banks caught in merger frenzy NatWest should have little trouble clinching a good deal.

Scottish Power, bidding for Manweb, rose a further 8p to 378p as Panmure Gordon continued a push based on expected earnings growth. Manweb added 10p to 1,018p. But just to underline that chasing takeover stocks often leads to burnt fingers, the shares of Canadian Pizza slumped 14p to 72p when bid talks were called off. And fading hopes of a bid from TI Group left Senior Engineering 3.5p weaker at 109p.

A profit warning lowered Excalibur, an engineer, 6p to 22.5pArtesian Estates gained 5p to 86p. It is near to making a significant acquisition. Not for the first time tiny Orb Estates was the most actively traded share with Seaq recording turnover at 61.21 million. But it did nothing for the price; stuck at 0.5p.

BI, the engineer which used to be called Bromsgrove Industries, firmed to 102p. James Capel placed 2.7 million shares with an institution at 101p.