MARKET REPORT : French romance cools for AWA

The FT-SE 100 index gained 29.8 points to 3,049.3 and the FT-SE 250 rose 0.5 to 3,401. Turnover was 701.1 million shares with 22,624 bargains. Gilts rose more than one point.

Arjo Wiggins Appleton, one of the more intriguing stock market constituents, hugged the limelight as the shares jumped 12.5p to 251p in busy trading.

The paper and packaging group has been the subject of intense takeover speculation since the death of Bernard Dumon, head of the French group, St Louis.

St Louis accounts for 40 per cent of AWA. In recent times it had displayed much more interest in its food operations than its packaging involvements,

Its late chairman died on a trip as he analysed a possible food expansion in eastern Europe.

St Louis is, in effect, controlled byWorms et Cie and the Agnelli family.

They are both thought to be much more keen on further food expansion than developing the packaging side. Indeed, if the price was right, a deal could easily be concluded the market believes.

AWA is seen as vulnerable as the French disenchantment becomes increasingly obvious. The failure of the group to appoint a finance director and the lack of a British boardroom representative are also seen as indications the group cannot be expected to remain independent. In the past week the share have risen from 223p.

Four years ago the £1.5bn merger between Britain's Wiggins Teape Appleton, once part of BAT Industries, and France's Arjomari-Priopux seemed to be one of those Euro-deals born in heaven when it was announced.

But, like so much of the alleged EC influence, the realisation has failed to meet expectations.

The group has committed the cardinal sin of cutting its dividend. And the shares have fallen from a peak of 309p to a low of 127p, before staging a recovery.

It is quite clear that St Louis holds the key to AWP. The struggle regarding St Louis's destiny will ultimately decide whether the Anglo-French packaging and paper group has an independent future.

Its current stock market capitalisation nudges £2bn, an ideal target, some would argue, for that bidder for all seasons, Hanson, to show its hand. If not, perhaps, Bowater would be prepared to take the AWA group out of its misery?

The rest of the stock market had a more enjoyable day with the FT-SE 100 index gaining 29.8 points to 3,049.3. New York's dramatic surge to a peak above 4,000 was the prime factor behind the advance.

Hopes that US interest rates had at last peaked, the Ulster initiative and some encouraging company figures combined to add a little sparkle to what could easily have been another subdued performance.

But electricities, so long the bedrock of an uncertain market, had a dull session as Trafalgar House produced the sort of takeover offer for Northern Electric the market had been dreading. The new offer left Northern 75p lower at 1,053p.

Other electricities gave ground with such takeover favourites as Yorkshire (Hanson) and Seeboard (a French group) giving ground.

The generators had a bright day with National Power puting on 2p at 482p and PowerGen 6p at 519p.

Lucas Industries had a difficult session as US authorities said they would block any future defence deals. At one time the shares were down to 163p; they closed at 175p, off 7p. Seaq put turnover at almost 15.5 million shares, a big volume by Lucas standards.

Cable and Wireless improved 5p to 387p as it confirmed it intends to become a partner with the Japanese giant Nippon in the new-style handy phones, said to be the successor to mobile telephones. C&W is prepared to invest $10m in the venture.

Telegraph, the newspaper group, gained 54p to 434p as Canadian Conrad Black said he would bid for the outstanding shares. Any buyback price has yet to be disclosed.

In May Mr Black, ahead of a sharp price cut by the Daily Telegraph sold shares to institutional investors at 587p.

SmithKline Beecham drew comfort from a US Food and Drug Administration approval of a hepatitis drug; the shares rose 18p to 497p. But British Biotechnology fell a further 23p to 441p in response to last week's surprise admission the group faced delays over one of its cancer treatments. The shares have fallen nearly 150p since the statement.

Airtours, rumoured to have a series of European acquisitions in mind, gained 4p to 419p. There is also said to be the possibility of a rights issue.

Tullow Oil put on 2p to 46p after reporting a "highly encouraging" exploration well in Syria. It holds a 24 per cent interest in the development. The shares have recovered strongly since Tullow revealed what was regarded as disappointing progress in Pakistan, its main development area.Newcomer GET, started as Great Eastern Trading in 1955, made a firm debut. Shares of the electrical components group opened at 128p against a 125p placing price by stockbroker Greig Middleton.

Horace Small Apparel at last responded to takeover interest, gaining 8p at 104p and Filtronic, the new issue star of 1994, continued to advance, gaining a further 6p to 246p as takeover hopes swirled.

Vodafone put on 6.5p to 196.5p with US buying said to be responsible and Amersham International rallied 29p to 836p with US buyers said to be interested.

BSkyB, the television group, had another weak session as fears grew about possible competition in the satellite television industry.

The shares retreated 4.5p to 256p, a two-day fall of 11p.

Syltone, a maker of road engineering projects, firmed 1.5p to 159.5p. Stockbroker Beeson Gregory has adopted a bullish approach. It forecasts profits will hit £3m this year (up from £2.52m) and £3.6m next.