Market Report: Now takeover talk centres on Williams and Abbey

THE BANK Abbey National and the fire and security group Williams set the market alight yesterday amid whispers of two mega-deals.

The rise in the two shares went almost unnoticed as the world and his mother piled into the new techMark for hi-tech companies, but eagle-eyed dealers swore that the two old-fashioned stocks were the ones to watch.

Abbey National firmed 16p to 1,197p on an intriguing story of interest from a large overseas player. Some well-travelled dealers are convinced that the former mutual is the target of a German giant with global ambitions. The names of Deutsche Bank, Dresdner and Commerzbank were mentioned.

Abbey is regarded as a solid business but it is seen as too small to survive in the size-is-everything world of international banking. A deal with a bigger European rival could be the answer to its problems. More complex minds suggested that Abbey could try and fend off a predator with an acquisition of a UK rival such as the Woolwich, 8.5p higher to 362.25p, or Northern Rock, down 2p to 402p.

Rival Barclays surged 48p to 1892p on perennial rumours of a strike from US behemoth Citigroup.

As for Williams, the shares locked in a 9.5p rise to 336.5p in large volume of more than 14 million. Punters and institutions were said to be filling their boots with the former blue chip on hopes of a resumption of talks with US rival Tyco.

Merger discussions between the two broke down twice in the past few months because Williams wanted 500p per share and Tyco was only offering 450p. However, since then the UK's company's price has lost some 28 per cent and an offer of 475p by Tyco could be enough to win the day.

Other bids from Continental and US rivals were also seen as a possibility.

The rest of the market was monopolised by hi-tech stocks. The FTSE 100 finished 50.5 better at 6331.3 - its best level in two months - as the funds tracking the techMark piled into computer and Internet shares. The IT bonanza spilled over into the undercard, with the FTSE 250 finishing 74.7 better at 5,794.0 and the Small Cap rising 20.7 to 2,679.7. the techMark 100 index ended 120.7 higher at 2,421.13, helped by a roaring start in Nasdaq, its US brother. The hype over the techies was such that relief at the Bank of England's decision to hike rates by just 0.25 per cent was regarded as a minor sideshow.

Software group Sage led the hi-tech charge with a 335p rise to a record 3731p. Rival Misys put on 46p to 589p after an analysts' presentation, while computer group Sema soared 58.5p to a 889.5p high. The Tomb Raider maker Eidos stole the show in the midcap beaming 450p higher to 4700p, as the techMark excitement was compounded by wild whispers of a bid from Microsoft. Computer consultant Logica added 85p to 1,035.5p ahead of its entrance into the FTSE 100 next week in place of Securicor, up 0.5p to 609p.

Back in the real world, bank HSBC firmed 19.5p to 750.5p on reports of an imminent conclusion of its troubled takeover of Republic of New York Bank. Information giant Reuters jumped 39p to 604.5p on vague talk of a US deal, while cleaning giant Rentokil edged 0.5p higher to 201p ahead of a US roadshow.

Cable group Telewest missed out on the hi-tech fun, sliding 13.5p to 276.5p as profit-takers moved in. However, a US predator is still believed to be lurking. BSkyB lost 23.5p to 620p after revealing that it will issue shares to fund its expansion. Shell, 15.5p down to 449p, was undone by poor third quarter results, while Unilever, 18p lower to 541p, was undermined by nerves over today's Q3 figures.

Building materials group Tarmac cemented a 67p rise to 554p after reopening talks to be bought by mining group Anglo American, down 35p to 3,330p, for 585p per share.

The traffic control systems maker Trafficmaster blinked 39p higher to 535p on whispers of a deal, while Photo-Me clicked 135p better to 1,652.5p on talks of a foreign tie-up.

Supermarket struggler Somerfield shed 2.75p to an all-time low of 122p despite whispers of a sale of more than 100 stores to be followed by a cash-back. Fears of poor sales sent clothes chain Debenhams 15p lower to 230p. Rival Storehouse firmed 2.5p up to 72.5p on growing talk that it is on the shopping list of the cash-rich shell Knutsford, up an astonishing 90p to 240p, alongside Marks & Spencer, 13.25p better at 286.75p.

The minnows had a lively session. The biotech tiddler Aortech was the market's biggest riser with a 216p surge to 524p after receiving US approval for its cardiac kit. Rival Cantab Pharmaceuticals soared 20.5p to 147p after the chief executive said it was in merger talks, but the statement was denied after the close.

Software group Harrier, entrepreneur Bob Morton's latest vehicle, debuted with a 38p rise to 148p, while computer minnow Sanderson rose 21.5p to 211.5p after unveiling a 220p-per-share bid approach.

On a spivvier note, the managing director of marketing tiddler Premier Direct, up 42p to 278.5p, was forced to cancel his purchase of 8,000 shares hours after appearing on C4's Show Me The Money programme" to puff his company.

SEAQ VOLUME: 1.35bn

SEAQ TRADES: 96,766

GILTS INDEX: 108.33 +1.48

f.guerrera@independent.co.uk

THE COMPUTER game-maker Rage Software had a great time yesterday. The shares surged 3p to a five year high of 43.75p amid whispers that the legendary tipster Jim Slater is having a sniff. According to the rumour mill Mr Slater, a long-time fan of the stock, has bought a large chunk of shares and could soon tip Rage in his newsletter. Rage-watchers believe that the company's earnings will be boosted by its new best-selling games.

PUNTERS ARE rushing to buy Dialog once again amid whispers of a debt-reducing spin off. The online business information specialist, whose share price has had more ups and downs than a yo-yo, rose 11p to 80p yesterday on talk that it is to spin-off its e-commerce arm Sparza. Industry experts believe that a separation of Sparza from Dialog could herald a flotation or a sale of the division in a bid to reduce the company's pounds 13m debt.