Market Report: German rate hopes set off a 40-point revival

A GENTLE hint that German interest rates may soon be edged lower revived flagging blue chips.

The FT-SE 100 index ended a four-day decline with a 40.6-point bounce to 3,400.6, with much of the early impetus coming from the futures market.

Leading shares are hungry for lower interest rates, and when Whitehall this week appeared to snatch away the cheaper money carrot the index fell 86 points.

But even during the decline the stock market undertone remained firm. The easing of the buying pressure alleviated some of the more squeezy conditions, allowing hard-pressed market-makers to improve their positions.

But they were not prepared for the sudden activity yesterday and were forced to take defensive action, lifting prices sharply. Consequently many share movements were exaggerated.

Supporting shares, less slavish to the interest rate influence, had performed more strongly than blue chips and the FT-SE 250 index finished at a peak of 3,915.7, up 33.6.

Private investors, tortured by the poor returns offered by building societies and other high street investments, are continuing to switch at least some of their capital into shares.

Many high street organisations are now declaring their six- monthly interest payments, allowing investors to see in stark clarity the decline in their investment income.

Private client brokers were undoubtedly busy, with turnover for the fourth time this year topping one billion shares.

In what has been the busiest trading account for many years, with turnover topping 8.5 billion, the FT-SE 100 index fell 17.8 points.

But, underlining the strength of the non-Footsie stocks, the FT-SE 250 gained more than 100 points.

The market had to overcome renewed worries that US interest rates could be forced higher and an anxious government stocks market, unsettled by the announcement of the latest gilts auction.

But an overnight Hong Kong recovery helped sentiment, lifting the HSBC banking group 29p to 911p and Cable and Wireless 13p to 508p.

LWT (Holdings) put on 6p to 667p on talk of a white knight taking a near-30 per cent interest. Yorkshire TV, on the lingering suspicion that it remains scripted into the current bid soap opera, rose 6p to 186p. Granada, the bidder for LWT, fell 11p to 551p.

Rank Organisation and First Leisure continued to score from their figures, but TSB ran into profit-taking although managing to close with a 1p gain at 278p.

Reuters remained firm after its Quotron acquisition and Thorn EMI rose on the back of its decision to produce quarterly results.

The Forte alliance with the international investor George Soros for the Italian Ciga hotel chain lifted the hotel group's shares 13p to 283p.

Among merchant banks, SG Warburg improved 10p to 955p as the stockbroker James Capel placed 530,000 shares at 945p. Warburg, it appeared, upgraded the RMC building materials group, prompting a 17p gain to 1,027p.

NatWest Securities encouraged a few garage groups. T Cowie advanced 3p to 305p and Lex Service rose 5p to 479p.

Water shares attracted early attention, largely on yield considerations, but electricities were unsettled by reports of a huge clean-up bill.

The generators were hit, with National Power falling 11p to 467p and PowerGen 9p to 535p.

Bid fever cooled, at least for the time being, at Fisons, unchanged at 142p. Trading was again busy, with Seaq putting turnover at nine million shares. Medeva, on its return to favour in the US, improved a further 6p to 163p.

Donelon Tyson, the Cheshire civil engineer where Morgan Stanley, the big US investment house, has been stakebuilding, improved 5p to 26p and Hampden, the Irish do-it-yourself group, touched 31p, closing at 25p, on hopes of Ladbroke action.

The betting and hotels group has a 29.9 per cent interest which could provide the platform for a bid.

Carlisle, a property agency, rose 3p to 36.5p as the entrepreneurial investor Nigel Wray confirmed he planned a revamping operation. He is moving in as the chairman.

Clayton, Son & Co, a Leeds engineer, jumped 33p to 103p. It has had an approach which could lead to a bid.

Hewitt, a ceramic and building materials group, crashed 49p at one stage, closing 18p down at 185p. Formerly one of the market's high-flyers, it warned that it made only a small profit last year. The old-established group was revived by Christopher Nurse, once with UBS. Profits reached a peak of pounds 832,000 in 1992.

MR Data Management, a microfilm and laser printing group, came under pressure with some suggesting Kleinwort Benson had turned seller. The shares fell 11p to 192p.

The FT-SE 100 index climbed 40.6 points to 3,400.6 and the

FT-SE 250 index 33.6 to 3,915.7. Turnover was 1,023.6 million shares from 43,320 deals. The account ends on 28 January with settlement on 7 February. Government stocks gave ground.

The expected Whitbread portfolio shake-up following the takeover of its investment arm is under way. As a result the brewing group has emerged with a 19.94 per cent interest in Boddington and 21.03 per cent in Marston Thompson & Evershed. It looks as though it has sold a few shares, but to satisfy the Beer Orders it must reduce its stakes to 15 per cent.

Flagstone Investments has been subdued since Channel Islands entrepreneur David Kirch injected assets and became a significant shareholder. Word is that other Kirch interests, possibly operations at Land's End and John O'Groats, are about to be absorbed by Flagstone which hopes to become a force in the leisure industry. The shares rose 0.25p to 1.75p.

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