Market Report: London shares head for record territory again

THE MARKET shrugged off riots in the City and a wobbly Wall Street yesterday to head towards the heady heights of a couple of months ago.

As anarchists and police clashed in the Square Mile's streets, dealers kept their heads down and pushed the FTSE 100 to 6,527.8 - a 34.2-point advance on the day. The blue-chip index showed good staying power, holding on to its gains for most of the session. A dip in Wall Street just before the London close and a bit of pre-weekend profit taking reduced the overall advance but could not detract from a resilient performance.

The leading index has, almost unnoticed, come back to within striking distance of its April all-time record of 6,598.8 and some bulls believe that next week it could launch an attack on that level.

The dealers who escaped the protesters' paint bombs said that sentiment had been underpinned by hopes that US rates will go up just once in the coming months.

The session was enlivened by the expiry of the June options contract. The mid-morning deadline for trading the derivatives series sparked a battle between two heavyweight brokers.

SG Securities and CSFB found themselves pushing large programme trades across the index at around the same time in order to tidy up their books ahead of the expiry.

The fact that SG was a seller of the index and CSFB was a buyer made for some volatile trading with screens turning red and blue in the space of a few seconds.

The options-triggered excitement was an interesting sideshow to the usual flurry of bid rumours. Lloyds TSB jumped 7.5p to 921.5p on growing rumours of a big deal. The latest whispers said the bank was having a good look at Scottish Widows, the fund manager.

Other financials remained well-bid. Barclays firmed 25p to 1,979p on talk that Mike O'Neill could yet become chief executive. A Salomon upgrade and continued whispers of a tie-up with Royal Bank of Scotland, up 36p to 1,426p, were also behind the move.

Telewest Communications was one of the day's stars. Shares in the cable group, where Microsoft has a 30 per cent stake, beamed 11.25p higher to 285.25p on whispers that its pounds 30bn tie-up with Cable & Wireless Communications, up 20p to 600p, could be clinched soon. Continental giants France Telecom and Deutsche Telekom could take a stake in the combined group, while UK rival NTL is also keen to join.

Tesco bagged a 6.5p rise to 171.5p in big volume as HSBC said "add" and speculative punters gambled on a corporate move. Kingfisher, up 14.5p to 737p, is known to be hungry for acquisitions.

Aerospace Smiths Industries flew 31p higher to 923p on revived talk of a sell-off of its medical products arm.

The retailer-cum-Internet group Dixons rose 28p to 1,227p. The prospectus for the pounds 2bn float of its Freeserve web venture is said to be very near.

A series of broker notes helped several big hitters. BAT puffed 30.5p better to 603p after CSFB recommended it as a strong buy and upgraded forecasts. Rival Imperial Tobacco was dragged 22p lower to 742.5p, hit by the ban on cigarette advertising.

The publisher Emap bounced 32p higher to 1,195p after reassuring brokers that there was nothing sinister behind Thursday's slump. House broker ABN Amro supported the company's explanation by moving from "buy" to "hold".

Whitbread fizzed 52p lower to 1,046p to become the worst blue-chip of the day, as Punch Taverns prepared a cash bid to trump its pounds 2.4bn share offer for the pubs owned by Allied Domecq, up 8.5p to 612.5p.

BG slumped 14.75p to 372.25p despite announcing the long-awaited plans to ring-fence Transco and to issue up to pounds 2bn worth of Transco bonds. The move could herald a demerger or a bid from Shell, up 5.75p to 494.5p.

BSkyB's digital decoders are believed to be selling like hot cakes and its maker Pace Micro jumped 10p to 195p. However Rupert Murdoch's company was stuck at 596p.

The rest of the midcap had a good day and the FTSE 250 finished 11.1 higher at 5,913.6 - its highest level since the beginning of 1999. The Small Cap followed suit with a 7.1 rise to 2,639.0.

Morgan Crucible returned to the bid fray and rose 14.5p to 295p. A management buy-out or a strike by a foreign rival are mooted. Plasterboard maker BPB is another rumoured target. The stock jumped 22.25p to 389.75p ahead of an analyst's visit to its Prague site next week.

Insurer Jardine Lloyd Thompson was 13p higher to 251.5p on vague whispers of corporate action. The food sector is bursting with takeover talk.

Express Dairies, up 7.5p to 134.5p, is odds-on to take part in the long- awaited consolidation among milk producers, while Northern Foods, up 5p to 130p, could also be a player. Sausage-skin maker Devro, up 4p to 125.5p, has been in the takeover or MBO frame for some time.

Inchcape, the restructured conglomerate, rose 4p to 159.5p as buyers piled in ahead of Monday's 100p special dividend.

Publisher Taylor Nelson soared 9p to 153.5p after WestLB Panmure went bullish.

Among the minnows, photocopier maker Danka experienced a rare rise, 2p to 116.5p, after selling a fax division to Xerox. Biotech group Axis Shield soared 37.5p to 472.5p on heavy buying by a leading broker. Returning bid talk sent packaging group Jarvis Porter 11.5p higher to 73.5p, while defence engineer Chemring surged 6.5p to 147.5p as a buyer was said to be sniffing around.

News of contract delays prompted a 37.5p fall to 285p in engineer Eve Group.

SEAQ VOLUME: 1.1BN

SEAQ TRADES: 101,863

GILTS: N/A

SAVE GROUP, the petrol retailer, is attracting some buying. The shares firmed 2p to 43p yesterday in heavy volume of over 3m. Some dealers believe the struggling company is ready to be taken out by one of its bigger rivals at around 100p per share. Such an offer would value Save at about pounds 97m and could persuade shareholders, which include PDFM and M&G. They have seen the shares slump from a 1995 peak of 269.25p and are probably looking for the exit.

THE ELECTRONIC commerce company IMVS.com yesterday returned to the junior Ofex market after a short absence and immediately jumped 48p to 152.5p.

Shares in the Net-based purveyor of music and videogames were suspended to facilitate a pounds 5m fund raising. The exercise has just been completed with the help of some venture capitalists and the company plans to spend the proceeds on advertising.