Market Report: CGU gets Net boost with plans for online venture

CGU WAS caught up in the stock market's obsession for Internet stocks amid talk that a web deal is on the way. As the FTSE 100 stopped just short of its all-time high, the insurance giant put on a respectable 21.5p to 888p.

According to the whispers, the general insurer is preparing to unveil a major Internet initiative in the very near future, possibly as early as next week. Logged-on dealers said the company could become the latest online play in this Web-crazed market.

A thick veil of secrecy surrounds the CGU project but rumours emanating from the ever-gossipy insurance industry suggests that the Web project does not involve the company's core business. Apparently the insurer is planning to depart from the bread-and-butter underwriting business and use its large customer base for another Internet-based venture.

The other intriguing rumour among financials centred on Barclays, up 99p to 1,716p. The high-street bank rebounded from recent weakness as talk of corporate action returned to the fore. As usual, dealers were split between those who believe that Barclays will be prey and will be taken over by an American or European rival, and those who think that it will soon become a predator and bid for a smaller competitor - or even for NatWest, 23p higher to 1,328p. An HSBC buy note also helped. Fellow financial group Royal & Sun rose 22p to 385p in vague bid talk.

Remaining blue chips were in good nick, thanks to a positive Wall Street opening after some benign economic data and growing talk of mega-deals. After a losing morning, the FTSE 100 was supported by encouraging buying momentum and closed 58.7 points higher at 6,739.5 - less than three points away from last Friday's record high.

There were no prizes for spotting the biggest story of the day. Marks & Spencer soared 37.25p to 300.25p in spectacular turnover of nearly 100 million shares as retail and institutional investors were left spellbound by talk of a bid from a rival. Potential predator Tesco was down for most of the day on talk of a 400p-per-share paper bid, before bargain hunters pushed it 3p higher to 185.5p. Archie Norman's Knutsford, down 11p to 238p, Kingfisher, 12.5p higher to 614.5p and Swiss retailer Hennes & Mauritz were the other names in the frame.

The water stocks eased higher, helped by good results and an increased dividend from United Utilities, 68p higher to 550.5p - and bid talk. Cunning investors have noticed that German utility RWE is a shareholder in that country's mobile operator E-Plus, which has just been bought by Dutch rival KPN. According to them, RWE could splash the E-Plus proceeds on a UK water company such as Severn Trent, 18.5p higher to 606p, or Thames Water, up 27.5p to 714.5p. UK rival Scottish & Southern Energy, 26p better at 514p, could become a prey unless it buys a smaller group such as Kelda, 33p up at 310p or Pennon, 33p higher at 530p.

The E-Plus purchase sent Vodafone AirTouch 2.5p lower to 311.5p amid talk that losing bidder France Telecom could turn to Mannesmann, while Cable and Wireless soared 36.5p to a record 1,081p on growing bid talk.

A sparkling trading statement from computer group Logica, 223p better at a record 1,697p, helped rival Sage, 467p higher to 6,196p.

The bear story of the day came from Corus, down 10.25p to 125.5p. The old British Steel's decision to close its plant in Stoke reinforced whispers that the strong pound is hammering demand. Investment bank Schroders fell 50p despite whispers that Tetley Tea - the privately-owned company where it holds a stake - could soon be taken over by India's Tata Tea.

The FTSE 250 hung on to the blue chips' coat-tails to rise 56.3 points to 6,283.4 thanks to chunky rises in several stocks.

The Web high-riser eXchange soared 68.5p to 385p after a deal to provide financial information for the US search engine Yahoo!.

Hopes of Internet deals pushed retailer WH Smith 46p better to 448p and photo-booth group Photo-Me 27.5p better at 390p.

Drug-maker Powderject surged 90p to 802.5p on speculation of a licensing deal for its anaesthetic Lidocaine - possibly with Johnson & Johnson -, and a positive note from broker CSFB.

Returning whispers of a sale of its Odeon cinemas sent leisure underperformer Rank 5.5p higher to 196p, while vague takeover rumours helped the retail strugglers Storehouse, up 3p to 44.75p and Arcadia, 2.25p higher at 66.25p.

The car leasing agency Lex Service enjoyed no such good luck. The stock stalled 35.5p lower to 388.5p on talk of an imminent collapse in used- car values.

Engineers were unsettled by fears of profit warnings, with Charter dipping 17.5p to a record low of 257.5p and Cookson falling 15p to 235p.

The Small Cap broke through the 3,000 level for the first time ever after a 13.9 rise to a 3,007.

Financial group Talisman House, owner of broker Seymour Pierce, jumped 18p to 55p on renewed bid talk, just like luxury goods group Marchpole, 4p higher to 14p. Regional newspaper group Newscom rose 235p to 1252.5p despite rejecting a bid from US publisher Gannett.

Biotech tiddlers were active. Phytopharm jumped 74.5p to a best-ever 402.5p on whispers of two potential blockbusters. Oxford Asymmetry firmed 21p to 325p after an upbeat trading update, while Protherics rose 2p to 48p on whispers of a big deal.

Mobile data tiddler Scotswood fell 4.25p to 34.75p despite whispers of an incoming newspaper tip.

SEAQ VOLUME: 1.79bn

SEAQ TRADES: 117,225

GILTS INDEX: n/a

f.guerrera@independent.co.uk

THE COMPUTER group Superscape, down 1.5p to 341p, could soon deliver a positive update to shareholders.

The specialist designer of 3-D software for web sites is rumoured to be close to clinching a deal with the US chip giant Intel, which could be announced over the next few weeks.

Talk of further deals with large retailers to help them develop 3-D images for their Internet sites is also doing the rounds.

MEDISYS, the maker of a unique safety syringe, rose 5p to 73.75p after releasing a comical statement saying it has no links with a US group with the same name. But punters noted the company also said it would apply for US regulatory approval for the syringe "in the near future". Followers of the stock said the remark means the syringe development has been brought forward. Analysts were expecting a regulatory filing in the second quarter of 2000.