Market Report: Legal and General tops bid hunters' new year wish list

A FLURRY of rumours excited the financial stocks amid whispers that the first big deal of the new millennium will involve a bank or insurer.

Legal & General returned to the top of the bid hunters wish list amid talk that its acting chairman, Robert Margetts, is in favour of a takeover. The stock rallied 6.25p to 165p before settling 1.25p higher at 160p, partly helped by a CSFB and Goldman Sachs push. However, the excellent volume of over 17m shares suggested than the rise was due to more than analytical support. L&G followers believe that Mr Margetts, promoted from its position of deputy chairman following Monday's death of Sir Christopher Harding, would not shut the door to potential suitors, especially if they offered a price north of 230p.

Since the takeover bid from NatWest collapsed, the L&G shares have had a torrid time, touching a low of 144.75p, opening up a window of opportunity for a predator willing to mark the New Year with a large takeover.

Dealers said that both Lloyds TSB, 35.5p lower to 725.5p, and Abbey National, 20p higher to 980p, could be interested, especially if their rumoured merger failed to materialise. Foreign giants such as Dutch insurer Aegon could also be attracted by L&G's solid pension business and thriving fund management performance.

According to the City whispers, L&G's funds have fared well over the past year and should outperform the rivals who have plumped for "value" (lo-tech) stocks. One of them, the Prudential, was yesterday rumoured to be behind the cut price sale of a near 10-per-cent stake in the Garfunkel's- to-Chiquito's group City Centre Restaurants, flat at 64p. Rival Fleming was the other mooted seller.

Remaining financials were active. NatWest rose 9p to 1333p on talk that the regulatory clearance of the offer from Royal Bank of Scotland, 11p lower to 1106p, will trigger a higher cash offer from RBoS or Bank of Scotland, 6.5p lower to 703p. Norwich Union, another rumoured sitting duck, firmed 17.5p to 472.25p. Barclays missed out on the party, plunging 68p to 1645p on profit-taking. Some dealers are convinced that a further fall could put the High Street lender in the bid frame.

The rest of the market had a steady session despite signs of a slowdown in trading. The FTSE 100 jumped 38.2 to 6672 as the bid rumours and a switch into cyclicals provided support. Weaker-than-expected retail sales calmed fears of a rate hike and helped sentiment. Volume, at 1.4bn shares, was lower than Wednesday, amid a general winding down of trading activity. New York let the side down with a wayward opening and a three-figure slump minutes after the London close.

The domestic market's resilience will be tested this morning with the dreaded "triple twitching" options and futures expiry. The December twitching usually triggers a high level of volatility and many dealers will be on the edge of their seats.

Old-fashioned blue chips such as oils and metals did most of the running. Among the former, Shell flared 19p higher to 518.5p as analysts left Wednesday's meeting with a warm glow and a batch of upgrades. BP Amoco firmed 9.5p to a record 642.5p. on growing talk of a swift completion of the Arco purchase. Metal-diggers had their day in the sun as the prices of aluminium, copper and nickel soared. Rio Tinto jumped 113p higher to a best-ever1468p, Billiton climbed 28p to a record 380.75p, Anglo American drilled a 218p rise to 4268p peak and Lonmin surged 48p to 660p. Steel giant Corus rose 10p to a five-year high of 158.5p in sympathy amid vague talk of a merger with a Japanese rival.

Cable group Telewest flew the flag for go-go telecom stocks, rising 26.75p to 340p after confirming merger talks with TV producer Flextech, 5p higher to 1215p. Marks & Spencer rose 2.25p to 272.25p on rumours of a boardroom shake-up which could sideline chief executive Peter Salsbury. Rival House of Fraser, firmed 1p to 58p, despite talk of tough trading. The second liners followed the FTSE 100's footsteps, with the midcap rising 32.5 to 6262.1, while the Small Cap rose 9.2 to 2975.9, as the flow of takeover rumours refused to be stemmed by the pre-festive mood.

Engineer FKI soared 23.75p to 218.75p on positive feedback from Wednesday's internet acquisition and persistent talk of a bid or management buy-out. Weather Action, stable at 100p, could be the next group to join the web frenzy. There are rumours that the forecasting group turned cash shell, could invest in a privately-owned Internet group.

Takeover talk continued to surround Securicor, up 22p to a record 178p after in-line finals, and building materials group Aggregate Industries, 6.25p better at 69.75p.

Electra Investment Trust soared 62p to a best-ever 936.5p after unveiling a sharp rise in the value of its investments in two Far Eastern hi-tech stocks. Car dealer Inchcape motored 16.5p higher to 286.5p after rival International Motors bought a 9 per cent stake. IM said the holding was just an investment but there a rumours that it will buy one of Inchcape's businesses or even mount a full-blown bid.

The minnows were very lively. Nightclub operator Mezzanine soared 7.5p to 19.25p after launching an on-line record label and appointing George Michael's former manager to run it.

Web stalwart Geo Interactive Media jumped 137p to 802p on talk of huge deals and a positive presentation to a heavyweight broker. Rival BATM, 47.5p better to 3650p, was also helped by talk of an upbeat analysts' meeting.

Computer group Electronic Data Publishing climbed 35p to 216p on whispers that it was about to spin-off its highly-successful web activities. Would- be Internet banker e-primefinancial more than trebled on its AIM debut, closing 5p higher at 7p. A poorly-received cash raising sent Sandy Anderson's cash shell Honeysuckle 10.75p lower to 3.25p.

SEAQ VOLUME: 1.46bn

SEAQ TRADES: 89,868

GILTS INDEX: 106.06 -1.10

f.guerrera@independent.co.uk

EXPECT SOME news at leisure group ENIC, up 2p at 146p. The group is rumoured to be preparing to add an Internet investment to its holdings in football clubs and restaurant chains. According to the talk, ENIC could invest in an "incubator" for fledgling Net firms. Fans also note that the value of its stake in Easdaq hi-tech high-flier Autonomy is worth some pounds 62m, compared with ENIC's market value of pounds 139m.

ENTREPRENEUR BOB Morton could soon find a new name on the shareholders' register of his facilities manager Jordec, down 1p to 41.5p. Shami Ahmed of Joe Bloggs fame is rumoured to be building a stake in the company. Mr Ahmed is said to have been attracted by rumours of a huge deal that could reduce Jordec's dependence on nuclear decomissioning business. He is thought to have bought a 1.5 per cent holding.