Market Report: Smith rumours push financials higher

Smith New Court, the securities group, assumed the mantle of takeover victim.

At one time its shares were up 52p as rumours swirled that the merchant banker Rothschild had sold its 20.1 per cent to a German bank.

Even when Rothschild hurriedly issued a denial the story retained much of its appeal and Smith shares ended 25p higher at 452p.

The fraught atmosphere now prevailing in the financial world following the turmoil at SG Warburg and the bankruptcy of Baring has left financial shares particularly vulnerable to speculation.

Even before the Baring debacle the tendency was towards consolidation, as demonstrated by Warburg's unsuccessful merger talks with Morgan Stanley.

Still, Smith is no stranger to speculative surges. Last year the story went round that the Rothschild shareholding had been sold to Schroders.

The periodic Smith rumour will inevitably be given at least some respect, as the stock market, rightly or wrongly, is convinced Rothschild is a reluctant holder and would be a willing seller at the right price.

The renewed Smith speculation pushed other financials higher. Kleinwort Benson surged 32p to 600p, a two-day gain of 42p. Warburg advanced 9p to 698p.

Among the high street clearers, National Westminster put on 15p to 496p on hopes that it will acquire part of Barings, at a knock-down price. Barclays, results soon, gained 11p to 617p. More than £2bn against £664m is expected. Abbey National, expected to report profits of £873m (against £704m), today fell 5.5p to 435p. TSB, up 5.5p to 238p, was lifted by hopes of an insurance buy.

The rest of the market enjoyed one of its best days this year as the FT-SE 100 index jumped 31.9 points to 3,041.2. Hopes that the Government will survive the crucial Euro vote and a round of reasonable company results contributed to the surprise arrival of the feel-good factor. The success of the Government's generators share sale, with the offer 1.7 times subscribed, also helped confidence. But National Power fell 2p to 462p and PowerGen 3p to 494p.

Yorkshire Electric surrendered a little ground - 3p to 845p - as the suspected bid failed to materialise. There is still a widespread belief that a takeover shot is near, with some observers prepared to look for one today, providing the Euro vote confidence turns out to be justified.

While electricities were dull, waters bubbled cheerfully with an analysts' visit to Northumbrian Water providing the buoyancy. Gains were scored throughout the sector with Northumbrian 22p higher at 753p. One thought tantalising the market was the possibility of special dividends, so far the preserve of the regional electricity companies.

Glaxo jumped 18p to 652p as Brussels cleared its near £9bn bid for Wellcome, up 14p at 1,028p. The market believes the Glaxo bid, still with some some regulatory obstacles to overcome, will succeed unless Wellcome's ambitious dream of producing a white knight is realised.

Cantab Pharmaceuticals was the day's main casualty, crashing 120p to 163p as its US partner abandoned trials of a drug designed to prevent kidney transplant rejection.

Airtours, the holiday group, was steady at 418p. It plans to take analysts to Majorca later this month. Unigate, meeting analysts next week, improved 7p to 359p.

RTZ, up 18.5p to 755p, was helped by a profit upgrading, thought to be by Barclays de Zoete Wedd. BICC's comments on higher copper prices also helped. The goup's upbeat statement and decision to cut its dividend helped BICC shares 7p higher to 317p. Worries about the funding of BPB Industries' £700m US acquisition lowered the shares 9p to 285p.

Old takeover favourites were back in demand - Argyll rose 7.5p to 277p and United Biscuits 5p to 339p.

The Pentos receivership hit book publisher Hodder Headline, off 25p to 303p. The book group would appear to have a £500,000 exposure.

Kingfisher continued to enjoy the Henderson Crosthwaite recomendation, gaining 13p to 446p.

Utility Cable, laying television cables, held at 19.5p. Its chief executive, Brendan McCann, has purchased 250,000 shares at 19p and the founder John Fitzpatrick's pension fund has picked up 1 million shares at 21.5p and 19p.

Sherwood Computer Services rose 11p to 109p following a joint venture with an ICL subsidiary and the acquisition of Betas Computers. London Wall Equities is looking for profits of £1.1m (before provisions) followed by £2.1m.

SelecTV, the television programme maker, rose 1p to 29.5p. There are suggestions that MAI, the finance and media group, is seeking to add to its 4.19 per cent shareholding. Daily Mail & General Trust accounts for 13 per cent.

Brancote, a mineral explorer, has raised more than £700,000 through a placing on the backwater 4.2 share market. It offered shares representing 16 per cent of its enlarged capital, at 45p. A year ago the company arrived on the market with a rights issue at 33p a share. The shares are now traded at around 50p.

Shareholders of British Thornton Holdings have suffered a depressing run. The price has crashed from 176p to 26p as its packaging business has felt the impact of the slowdown in the video games market. But the group is cash rich, probably more than 20p a share, and with a stock market value of £4m looks a sitting duck for a bid action.The FT-SE 100 index jumped 31.9 points to 3,041.2 and the FT-SE 250 index 10 to 3,394.1. Turnover was 604.5 million shares with 21,010 bargains listed. Government stocks closed up to £13/16 higher.