Market Report: Auction and Gatt hopes put gilt on gingerbread

GOVERNMENT stocks sent shares surging to yet new peaks, with the FT-SE 100 index climbing 40.1 points to 3,277.4, its fifth peak since Budget day.

The success of the gilt auction quickly encouraged shares to overcome early hesitancy and with the protracted Gatt talks at last appearing to be reaching a successful conclusion the stock market was suddenly galvanised into action.

Lower interest rate hopes, the inevitable futures trading and what appeared on occasions to be a desperate shortage of stock made significant contributions to the spree. Buying by US investors, some pulling out of the tortured Tokyo market, was also a factor.

With the Christmas trading account, starting on Monday, traditionally a time of cheer and exuberance, there are gathering hopes that some of the more exotic year- end index forecasts will be hit.

According to Datastream, yesterday's strength lifted share values by another pounds 8.25bn. Turnover was comfortably above the market break-even level.

Gilts scored gains of up to a point as the Bank of England announced that the pounds 3bn auction of 6.75 per cent stock, due 2004, was covered 2.19 times, a much better result than many expected.

Textiles was one threadbare sector, weighed down by the surprise profit warning from Courtaulds Textiles, off 54p (after 73p) to 489p. The CT fall-out hit Marks & Spencer, down 2.5p to 451.5p. The textile group, complaining of weak sales, is a big supplier to the high-street giant.

SmithKline Beecham was another to miss the party. Suggestions it is preparing to lower the price next year of its Tagamet ulcer drug did the damage. Tagamet already undercuts its big rival, Zantac from Glaxo Holdings. The shares fell 8p to 385p.

Others recovered early falls. Lloyds Abbey Life was down 15p in early trading, reflecting worries about the Securities & Investment Board's pension probe and a rumoured James Capel downgrading. By the close the shares were up 2p at 435p.

NFC, the transport group, was another to survive early nervousness as its rights issue, at pounds 263m, came in bigger than signalled. The shares closed 13p higher at 247p. NFC and Northern Foods have lost their FT-SE 100 places; they are to be replaced by two more utilities, Eastern Electricity and Scottish Hydro-Electric.

Even before the changes, due later this month, there is a strong body of opinion that the utilities are already too powerful an influence in the index.

Rank Organisation, too, recovered from early discomfort prompted by the restructuring at Xerox. The shares closed 10p higher at 914p. Kleinwort Benson is the latest to issue a buy recommendation, saying 'impressive' prospects are not reflected.

Hanson rose 6p to 266.5p in response to the likely settlement of its long-running, highly costly US coal strike.

Banks were again in top form with another rip-roaring display by Standard Chartered convincing many that corporate, rather than trading, developments are creating the excitement. The shares rose 42p to 1,237p, a 160p gain since the start of their advance last week, allegedly on the back of the Royal Bank of Scotland results.

Lloyds Bank, up 8p at 654p, mounted an unsuccessful assault seven years ago. It has held on to a 4.62 per cent stake.

Utilities were particularly strong, buoyed by interest considerations. Thames Water gained 10p to 565p and on the electricity pitch PowerGen surged 23p higher to 498p.

George Wimpey, the builder, was weak, down 11p at 165p. Cazenove and Goldman Sachs downgraded. Wickes, the do-it- yourself chain, fell 4p to 107p as estimates were trimmed.

Cadbury Schweppes edged forward 2p to 469p ahead of an expected round of analyst meetings; Dalgety, also preparing an investment trek, dipped 7p to 470p.

Lucas Industries was strong, with Hoare Govett seemingly leading the buying.

The strength of the shares, up 9p at 188p in busy trading, reawakened takeover dreams. The warrants were dragged 2.5p higher at 30.5p.

Sears rose 8p as 128p as Goldman Sachs placed 7 million shares and Chubb slipped 7p to 358p ahead of a dinner at Smith New Court. Great Portland Estates edged forward 4p to 229p. Richard Peskin, chairman, has sold 750,000 shares at 225p.

Perkins Foods dropped another 14p to 60p on its profit warning; Caffyns advanced 37p to 425p following figures and the architects Whinney Mackay-Lewis rose 6p to 74p as the entrepreneurial investor Bob Morton increased his stake to 11.19 per cent.

CrestaCare, the nursing home group, fell 1p to 37p despite bullish comments from Credit Lyonnais Laing, which looks for strong profits growth.

Hoskins Brewery, suspended at 78p, may bid for LGW, up 17p to 159p.

Shares reached new peaks. The FT-SE 100 index rose 40.1 points to 3,277.4 and the FT-SE 250 index 21.9 to 3,589.9. Volume was 821.4 million shares with 34,390 bargains. The account ends tomorrow with settlement on 20 December.

Andaman Resources, an obscure Irish exploration group that appears to have adopted a low profile in recent years, spurted 8p to 20p. It is in talks with as yet unidentified interests that may be prepared to pump cash into the group. Any deal is likely to involve a share issue at 10p. Andaman hit a 95p peak in 1989 following hopes of a big gold find in County Mayo.

More confusion at International Communication & Data. As a boarding party seemed to be closing in on the ICD board, an associate company, IMC Industries, has made a 9.5p a share offer that is below the market price and not intended to succeed. The bid has been triggered by IMC exercising an option to acquire ICD shares at 7.5p. ICD held at 12p.