Market Report: Hopes of interest rate cut send Footsie flying

SHARES were in exhilarating form, with the FT-SE 100 index breaking through 3,000 points for the first time and the secondary FT-SE 250 index climbing 23.8 to a 3,430.6 peak.

The upsurge, reflecting expectations of lower interest rates and the growing belief that at least the worst of the recession has been consigned to the history books, was not a mere market-making whim.

There was some determined buying, with overseas investors making their presence felt. Turnover stretched to one of the highest levels seen this year.

Shares have been in ebullient form since sterling was forced out of the exchange rate mechanism last September. Since what has now become White Wednesday, Footsie has advanced from 2,370. The index has nearly doubled from the deepest depths of the 1987 crash.

Footsie was produced as a more realistic guide than the narrow FT 30 share index, started in 1935. Its lowest level was 978.7, hit shortly after it was launched in 1984.

But, in recent months, the progress of the newfangled 250 index, mirroring the performance of the 250 shares that are on the brink of joining the exclusive Footsie club, has been more significant. Since its launch in October it has climbed more than 1,000 points.

The market actually started its record-breaking day on a subdued note. But once a French interest rate cut was known, buyers, institutional and private, materialised. Even so the milestone 3,000 level appeared to be out of reach until a sudden burst of futures activity sent shares powering ahead, up 34.5 to 3,006.1.

Datastream, the computerised financial service, estimated the gain was worth pounds 6.85bn, lifting the stock market's value to pounds 666bn. A strong performance by government stocks, with the September futures contract at a peak, added to the euphoria.

Among blue chips British Gas did its best to impress. It is generally expected that Tuesday's Monopolies and Mergers Commission report will do little harm to the group. The shares flared 13.5p to 228p.

A number of securities houses adopted bullish stances. Kleinwort Benson was one. It suggested the shares were worth picking up, forecasting that 'most of the possible (MMC) changes will have a relatively small impact on short-run profitability'.

The feared break-up is not part of the KB projection although it expects more details to emerge on British Gas's structural accounting.

HSBC, enjoying its elevation to the market's third-largest constituent, made further headway, rising 23p to 744p, a new high. Other banks, weak on recent comment, recovered; Lloyds rose 10p to 544p.

Insurance shares attracted support as Commercial Union joined the campaign to underline that the sector had recovered from its depths of despair and was making increasingly realistic profits. CU put on 12p to 661p. Royal Insurance, reporting today, edged forward just 1p to 344p. NatWest Securities expects an interim profit of pounds 45m against a pounds 79m loss.

Anglian, the window replacement group, rose 2p to 341p. James Capel placed around 1.3 million shares at 327.5p on behalf, it was thought, of some directors.

Hartstone, the troubled hosiery and leather group, continued to attract support from Fidelity, the US- dominated investment house that specialises in picking what it perceives as recovery shares.

It announced another buying spree, taking on 900,000 shares. Its stake is 9.17 per cent. Hartstone, now with new management, topped 280p last year. The shares closed unchanged at 59p.

Aberdeen Steak Houses, last in profit in 1989, was the day's best percentage gainer, up 28.6 per cent at 18p. The shares were floated at 67p in 1985.

Glenchewton, the old Cowan de Groot toys business, responded to the departure of Marlowe Holdings, a US electrical group, from its share register with a 4p gain to 33p. The Marlowe stake had been a restraining overhang. The company is the new vehicle for a former British & Commonwealth trio, headed by John Gunn with day-to-day management in the hands of Matt McBride and Allan Jonnes.

Investment houses were firm, reflecting the upsurge in share trading. SG Warburg, where takeover hopes linger, rose 12p to 809p; Smith New Court put on 6p to 301p.

A Cohen, a nearly 200-year-old metal group, became the latest to attract enfranchisement speculation. The family company is controlled through its voting shares, which were up 20p at 315p. The non-voting 'A' shares rose 35p to 275p.

The excitement over Cohen follows the Great Universal Stores decision to give votes to its non-voting shares. Since the votes-for-all announcement GUS shares have powered ahead. The 'A' shares rose a further 25p to 2,043p, a peak.

Whitbread, the brewer, is another where enfranchisement hopes are evident. The low-voting 'A' shares jumped 17.5p to 533p. The trend towards lower interest rates helped but many suspect Whitbread will be forced to reorganise its archaic share structure before long. The arrival of Sir Michael Angus, ex-Unilever, as chairman is expected to speed the restructuring.

A rampant performance left shares at new highs, with the FT-SE 100 index at 3,006.1 and the FT-SE 250 at 3,430.6. Turnover was a heady 830.4 million shares with 37,797 bargains. The account ends tomorrow with settlement on 23 August.

Mosaic Investments, a fallen star, is due to report today. The figures are unlikely to make pleasant reading. But there are hopes the accompanying statement will show it is on the way to recovery. There is even talk of new entrepreneural investors. One name in the frame is David Saunders who has achieved a reputation in Australia as a leveraged buyout expert. Mosaic shares held at 17p.

Acorn Computers could at last be on the verge of providing details of the sale of shares in its associate, Advance Risc Machines, which has produced a new microchip. There is also talk that Olivetti, the Italian group, will sell some of its near-80 per cent Acorn stake. Acorn, which last paid a dividend in 1985, is due to announce interim figures within the next month. The shares held at 112p.