Market report: Racal sweeps to record high as dealers detect a mega-bid on the radar

IS RACAL ELECTRONICS on the verge of a major deal ? Plenty of investors seem to think so and the shares in the maker of defence electronics equipment beamed 20p higher yesterday to an all-time high of 550p.

The rise almost went unnoticed as most market watchers focused on a new record high for the FTSE 100 and another stellar performance by the hi-tech stocks.

However, dealers with an eye on the real world whispered that Racal chairman Sir Ernest Harrison is about to announce a major transaction.

The Racal followers were split into two camps. One band of traders was convinced that the company is plotting its own demise through a sale to a European or UK predator. After the recent sale of its telecoms operations to US group Global Crossing, speculation has been rife that the Sir Ernest is lining up a bidder for the remainder of the company. Three groups topped the market's list of potential bidders: the German aerospace group Dasa, its French rival Thomson CSF and our very own British Aerospace, 23.75p higher to 403.25p on director share-buying and hopes of a European tie- up.

The second school of thought argues that Sir Ernest is preparing a final flourish before selling the company off. Racal has recently won a series of large contracts, including one to enable mobile phones to receive calls on the London Underground. According to some investors, Racal has another multi-million pound deal up its sleeve, which could be announced together with its results, due out shortly.

The rest of the market finished the week with the enthusiasm of stressed- out traders in front of their first pints of the weekend.

The FTSE 100 climbed 88.5 points to a new all-time high of 6,742.2 on strong volume of over 2 billion. Once again, the inspiration for London's strength came from Wall Street, where the Dow stormed 300 points ahead after a benign set of employment numbers.

The US market is now convinced that interest rates will be on hold for a little while. The American dream spilled over into the UK; the FTSE 100 shrugged off its pre-data apathy and embarked on a rip-roaring rally which saw it set a new intra-day high of 6,772.1. Second liners followed suit; the FTSE 250 jumped 82.4 points to a record 6,326, while the Small Cap surged 39.3 to a best-ever 2,931.6.

Tech stocks were the undisputed stars of the day as the techMark mimicked Nasdaq and soared by 6 per cent, or 219.8 points, to 3,434.76.

Computer group Sage jumped 619p to a record 5,405p, while rival Sema put on 142.5p to 1,297.5p and Misys soared 88.5p to 874.5p. The hi-tech midcappers also benefited, with computer specialist FI jumping 82.5p to a best-ever 680p and electronic group Bowthorpe rising 80p to 921p.

Telecoms stocks - the other high-flyers of recent times - were also well- bid. Internet portal Freeserve logged on to a 153.75p rise to a record 524.5p on vague talk that BT, 20.5p higher at 1,412.5p, could follow their recent deal with an outright bid. Cable group Telewest switched on a 50.5p rise to 339.25p after unveiling its digital interactive TV service with a host of partners, including on-line yellow pages Scoot.com, 39.75p higher to 128.75p, and supermarket Somerfield, 1p better to 83p.

The deal sent Flextech, a Telewest programme provider, 267p higher to a best-ever 1,350p. However Abbey National, another Telewest partner, slumped 26p to 1,024p on suggestions that under siege NatWest, down 15p to 1,412p, could seek a "white knight" deal with a mortgage bank.

Vodafone AirTouch firmed 5p to 305.75p amid whispers that it might lower the threshold for winning the Mannesmann bid from 50 to 25 per cent. Cable & Wireless jumped 72.5p to 877.5p after a bullish presentation to Warburg.

Inclusion in Merrill Lynch's "bull" list for 2000 helped brewer Bass, 3.5p up to 681p, but did little for engineer Invensys, 11.5p lower at 287.5p. Bearish figures from the British Retail Consortium sent Boots 36p lower to 584p and Sainsbury 11.75p down to 325p.

Clothes chain Arcadia bucked the sector trend with a 4p rise to 94p amid whispers that Archie Norman's Knutsford, 5p higher to 254p, was having a look. Bid talk helped New Look, 9.5p better at 120.5p. Takeover rumours also inspired media agency Aegis, up 9.5p to 190p. Speculation of a large deal sent investment vehicle Wassall 20p up to 280.5p.

No such luck for Welsh utility Hyder, 29.5p lower to 368.5p on rumours that next week's interims will bring a dividend cut and a multimillion pound cash call. Accounting irregularities demoted engineer Senior, down 21.5p to 70p. The group is for sale. However, distributor Premier Farnell soared 67.5p to 435p on good third-quarter figures.

Phonelink starred among the minnows with a 48p rise to 99p amid rumours of an Internet deal and talk that the Energis chairman Gordon Owen might buy a stake. Hopes of deals pushed up shells Bolton International, 6.75p to 15.25p, and Weather Action, 50p to 127.5p. Auctioneer QXL.Com surged 187.5p to 670p after a deal with US portal Excite. Talk of a bid sent IT group Action Computer 6.5p better to 89p, while an analysts' upgrade pushed architect Aukett Associates 1.75p higher to 21.5p.

SEAQ VOLUME: 2bn

SEAQ TRADES: 123,017

GILTS INDEX: 105.38 -0.74

f.guerrera@independent.co.uk

RUMOURS OF tie-ups between a market tiddler and celebrities are becoming a habit. Hard on the heels of the whispers, denied by all concerned, that Chris Evans and Danny Baker are to bid for Milwall Football Club, here comes speculation linking former bookie Arthur Shaw and the Spice Girls. Shaw, up 2.7p to a14.5p has been transformed into a concert-on- the-web company and is apparently to put the girl band on line.

TALK OF an intriguing deal sent shares in Internet group Gresham Computing 3.25p higher to 50.25p. According to web buffs, the company is preparing to launch its "Internet Robot" product, which scans the web to make sure there are no problems in receiving or downloading data. Followers of the stock say the kit could be extremely useful for large information technology consultancies. Talk of forthcoming good results also helped.