Market Report: Footsie continues to regain lost ground

FOOTSIE climbed to its highest point for more than two months as the stock market continued to recover from the dark days of the bear rampage.

A whiff of takeover action helped; so did a squeeze on short positions. But the enthusiasm was also encouraged by lower interest rate hopes, a generally favourable response to the Group of Seven meeting and New York's ebullience.

Chemicals provided most of the bid interest. The excitement stemmed from a US/German deal. The Du Pont chemical group is splashing out $1.9bn for the paints division of the Hoechst chemical group. Such a move merely reinforced a growing suspicion that the hard-pressed chemical industry is set for a round of consolidation.

Imperial Chemical Industries led the blue charge. The shares rose 44.5p to 536.5p as it completed its acquisition of a 70 per cent stake in the footwear adhesive business of Korea's Dongsung Chemicals and prepared to take analysts to see a US subsidiary.

Ellis & Everard is being pushed deep into the takeover spotlight with its shares climbing from a 12-month low of 166.5p this week. The price firmed a further 2.5p to 208p. There is confident talk in some quarters of a US strike next week.

Albright & Wilson, up 6p at 92.5p, and BOC, 35.5p to 877p, were others to benefit from the speculation. British Vita added 14.5p to 237p and Laporte improved 21.5p to 564p.

Banks were helped by the seeming easing of Brazil's financial problems with Bank of Scotland putting on a further 26p at 649p.

Footsie, in moderate trading, ended 79.9 points higher (after 96.7) at 5,438.4. The mid cap index bounced 78.5 to 4,811.4 and the small cap 31.4 to 2,012.5.

Telecoms were again to the fore. Persistent talk that Vodafone plans a link with Airtouch of the US added another 22p the shares at 800p. BT was 2p higher at 772p and Securicor surged 42p to 442p. TeleWest Communications enjoyed a Merrill Lynch buy upgrade, gaining 10p to 130p.

Asda, the superstores chain, was back in the doldrums, as analysts cut their forecasts. ABN Amro described the shares as a "strong sell"; Warburg Dillon Read said they were a trading sell. Schroders cut its profit estimates but put the shares in the "add" category. It has cut this year's forecast from pounds 430m to pounds 420m and next from pounds 465m to pounds 455m. The shares were cut 3p to 161p. At one time they were down to 156p.

Associated British Foods, ahead of what are expected to be an uninspiring set of figures next week, was the worst performing blue chip, giving up 38p to 560p. Besides flat trading there is unease about the extent of exceptional charges.

Reed International was at one time down 23.75p on a Merrill Lynch downgrade. The price ended a shade firmer at 505.5p.

Cassells, the publisher, rose 10.5p to 124.5p as it duly produced a counter bidder - in the shape of Orion which has already captured more than 50 per cent. Rival bidder Macmillan Publishers offered 100p.

SIG, a builders merchant, jumped 57p from a 12-month low to 148.5p as a management buy out loomed. Ramco Energy put on another 45p to 415p after it picked up 12.25 per cent of bid target MMS Petroleum, unchanged at 35.5p.

Tullow Oil lost 6p to 77.5p following interim figures - a much increased loss - and still no firm Bangladesh developments. The Irish oil explorer said it hoped to be awarded two blocks "soon".

Engineer Halma fell 10p to 120.5p after a cautious trading statement but Andrews Sykes rose 25p to 165p on the theory its pumps business will be a beneficiary of the floods. Powderject Pharmaceuticals jumped 45p to 435p after CSFB started coverage with a buy recommendation.

A bigger interim loss hit VossNet, an electronic trading systems group, which lowered the shares 19p to 57.5p. Limelight, the bathroom group, firmed 2.5p to 29p on the feeling that major shareholder Stephen Boler's sudden death could prompt a bid.

Capital Radio sounded a 30p gain to 500p as FMR, the US fund management group, picked up 4.2 million shares, 5.6 per cent.

Engineer Keller hardened 15p to 183p. The shares, down to 140.5p last month, have moved ahead since the group acquired on Tuesday an Egyptian piling contractor for pounds 1.9m.

SEAQ VOLUME: 898.5m

SEAQ TRADES: 65 422

GILTS INDEX: n/a

REECE, the fasteners and door panels group, rose 25 per cent - 0.5p to 2.5p - as takeover hopes were revived. Britannia lifted its stake by 500,000 shares to 27.2 per cent. Reece looks vulnerable. It is capitalised at around pounds 4m.

Britannia, an acquisitive construction group, held at 35.5p. The shares have been 42p this year. Five years ago they hit 62p.

Reece's best level over five years is 5p.

LITTLE-KNOWN GTL Resources scored the best stock market gain, jumping 65 per cent to 12p. Trading in the shares was, as is often the case, minimal. The Aim-traded company said it noted the jump but knew of no reason for the sudden activity.

The shares of the exploration group have been down to 4p in recent months. In summer two years ago the price nudged up towards 600p.