Market Report: Optimism over rates puts the sparkle back in Bass

SHARES WERE back in their traditional Christmas form - stretching to new highs.

Once again, lower interest rate hopes provided the spur. There was disappointment the lowest inflation figure for 26 years failed to prompt the eagerly awaited cut. But with some traders banking on a German reduction today the cheaper money bandwagon quickly regained its momentum.

Interest-sensitive shares led the advance. Bass, one of the poorest performing beer shares, encouraged the beerage higher with an 18p gain to 553p. Kingfisher and Storehouse featured among retailers and builders and related shares made headway.

The FT-SE 100 index rose 30.4 points to 3,278.8 while the supporting FT-SE 250 index put on 17.2 to 3,631.5.

Once again, futures trading was a significant influence, although the cash market had little trouble keeping shares on the boil when futures activity abated.

Utilities improved further with the spotlight swinging from waters to electricities. The generators surged as Offer, the industry watchdog, indicated the Monopolies and Mergers Commission might not be called in. The Government is intent on selling its remaining 40 per cent holdings, probably next summer.

National Power rose 13p to 449.5p; PowerGen 9p to 509p; Scottish Hydro-Electric 11p to 446p and Scottish Power 13p to 447p. The RECs were also strong.

British Petroleum responded to its investment presentation with a 6.5p gain to 333p. Analysts were told the group was on course to cut costs and reduce debts.

The oil giant happily said it had cut debts by dollars 3.2bn to dollars 13.1bn in the past 15 months and was looking to get borrowings to nearer dollars 10bn. A further dollars 1.5bn would come in from disposals next year.

Profit improvement was ahead of target, despite the deterioration in the crude oil price.

The BP confidence flowed through the sector, helping Enterprise and Shell higher.

Lasmo edged ahead 1p to 108p. The US investment group, Capital, has increased its interest to 5.31 per cent. On Tuesday the PDFM fund management group reported it had added to its stake and had 13.01 per cent.

The shares have been as high as 195p this year. Last week, on the signalled departure of Lord Rees as chairman, they touched 97p.

BAT Industries rose 12p to 527p. A transatlantic rumour suggested it was negotiating to buy the RJ Reynolds tobacco business. BAT's Brown & Williamson off- shoot is in third place in the US tobacco league.

Since Philip Morris, the drink and tobacco giant, embarked on a price war in April the US tobacco industry has been in turmoil. If B&W could capture Reynolds it would increase its power to combat the strength of Philip Morris.

Reuters fell 16p to 1,736p as a US securities house suggested profits should be taken. Marks & Spencer eased 5.5p to 438.5p as some suggested Barclays de Zoete Wedd had turned bearish.

Standard Chartered, the international banking group, had an eventful session, ending 16p down at 1,179p. At one time the shares were off 60p. Alleged comments by an official at a Hong Kong conference were read in some quarters as a profit warning. There was also talk of a profit downgrading, possibly by Cazenove.

Owners Abroad held at 80p as some speculated that the long-suspected rights issue was about to be announced. Tadpole Technology, another subjected to rights issue rumours, fell 20p to 244p.

British Airways enjoyed SG Warburg support, gaining 7p to 444p; house builder Persimmon improved 15p to 297p with Smith New Court saying buy; British Land fell 3p to 428p as director Nicholas Ritblat sold 60,000 shares at 429p.

Casket, the clothing and cycle group, up 0.5p to 40.5p, was heavily traded as an institution picked up shares. Hunters Armley, the printer, gained 10p to 180p on results.

It told institutions it had enjoyed its best margins in the last three months and the order book was strong with the TSB and Shell among new clients.

Aminex, the oil group, shrugged off the tension over the Russian elections, gaining 4p to 92p, but Bakyrchik Gold remained nervous, off 23p at 310p.

The two newcomers made headway. London Industrial, sold at 320, closed at 336p; the Mercury World Mining package scored a 6p premium with the shares at 97.5p and warrants at 42.5p.

A profit warning and the departure of the managing director sent Dorling Kindersley crashing 89p to 221p but results lifted the Daily Mail Trust 'twins' 625p to pounds 115.75p.

Millwall, the first division football club that has developed a stadium expected to become a mecca for pop concerts, held at 4p. It has raised pounds 518,000 by placing shares at 3.6p. Many of the new shares have gone to Jose Berardo, president of a leading Portuguese club, who now has 5.42 per cent.

The FT-SE 100 index rose 30.4 points to 3,278.8 and the FT-SE 250 index advanced 17.2 to 3,631.5. Turnover was 752.7 million shares from 28,809 bargains. The account ends on 31 December with settlement on 10 January.

Securitised Endowment Contracts, a market-maker in life insurance policies, is valued at pounds 9.1m after a placing at 60p. It had hoped for more but, said Williams de Broe, the placing was hit by results from its rival Policy Portfolio. SEC's directors, two linked to the crashed Honorbilt, abandoned plans to sell shares. Kleinwort Benson and Abtrust tooks stakes.

Expect developments today at Hoskins Brewery, where the former undertaker Howard Hodgson is in command. The group's shares were suspended at 78p while it negotiated the acquisition of LGW, a duty-free group, and the unquoted Ronson lighter group. The deals will be accompanied by a cash call, possibly as much as pounds 20m, and the return to market of Hoskins shares.

(Graph omitted)