Market Report: SmithKline stories won't go away

THE STOCK market refuses to accept that the pounds 110bn drugs merger between Glaxo Wellcome and SmithKline Beecham is dead and buried.

Despite the deal's acrimonious breakdown there is wide support for the theory that Glaxo will find a way of absorbing SB, which has been the most heavily traded share in recent days. Seaq put volume at just over 19 million yesterday, making an impressive near-50 million this week. The shares, up a further 15p to 715p, were 668.5p when trading started on Monday.

SB's intriguing display has also aroused stories that it could be seeking out another partner. Zeneca, up 35p to 2,669p, is one name in the frame. But a new Glaxo initiative is the market's favourite guess. The drugs giant is in urgent need of a major deal to strengthen its portfolio.

City institutions were horrified when the Glaxo/SB talks collapsed, seemingly on management differences. There was also the not insignificant influence of the huge fees the City had to forgo when the merger floundered.

Without doubt the consolidation of the drugs industry is continuing. The attempt by Sweden's Astra to buy full control of a joint venture with the US Merck group is merely the latest recorded move.

Switzerland's Roche is expected soon to flex its corporate muscles and the other drug leaders realise they must grow or be taken over.

Glaxo remained firm, up 21p to 1,784p, still a long way from the 1,983p reached when the earlier SB deal seemed set to succeed. SB touched 845p in those heady days.

The rest of the market endured a downbeat season with Footsie falling 32.4 points to 5,987.4. At one time it was off 75. The renewed weakness in Far Eastern markets did much of the early damage. The Hong Kong slide caused concern with HSBC tumbling 72p to 1,510p and Standard Chartered 20.5p to 693.5p. Rolls-Royce was lowered 11.75p to 277.25p. A cautious, although neutral, speech by US banking chief Alan Greenspan helped reduce the Asian woes. There had been fears he would hit out at Wall Street's exuberance and advocate higher interest rates.

Mid and small cap shares failed to buck the trend. The mid cap index lost 29.7 to 5,936.9 and the small cap 5.7 to 2,781.4.

The Footsie changes were upset by a late run by Nycomed Amersham. The health group at one time seemed destined for relegation to the mid cap index but a late run, possibly inspired by the capital reorganisation which came into effect yesterday, swung the balance. The shares, in their new slimline form, slipped 6.25p to 396p.

So Next, the retailer, continuing to feel the impact of its shock profit warning, and building materials group Wolseley, hit by the strong pound, were dumped from Footsie with Stagecoach, the transport group, and WPP, once on the brink of disaster, replacing them.

Daily Mail & General Trust, which just failed to squeeze into the blue chip index, fell 190p to 2,860p.

Thomson Travel, Computacenter, Seton Scholl Healthcare, Eurotunnel and Corporate Services were promoted to the mid cap index, where the casualties included Carpetright and British Biotech.

BriBio, after its traumatic time on Tuesday, produced a token rally, up 2.75p to 42.25p. Cortecs, the drugs group, fell 4.5p to 115p as former chief executive Glen Travers denied he had resigned but had, he said, been sacked.

British Petroleum softened 3.5p to 906p. It is taking analysts to see its Alaskan operations next week and there are hopes the meetings will prompt reserve estimates to be upgraded.

Ladbroke continued to score from the hotel excitement, gaining a further 5p to 360p. Thistle Hotels, where bid interest has been expressed, gained a further 12.5p to 250p. British Airways, on reports it intends to fly away from its proposed deal with American Airlines if the European Commission is too tough, climbed 10.5p to 695.5p.

Land Securities, the nation's biggest property group, edged ahead 4p to 969p. Stockbroker Walker Crips Weddle Beck rates the shares, which stand "at a substantial discount to prospective NAV and we consider this disparity to present a secure buying opportunity".

MFI, up 5p to 87p, and Dixons, unchanged at 570p, were put on the buy list by CSFB, and Diageo fell 11p to 753p as Williams de Broe said switch into Allied Domecq, unchanged at 598p.

Brake Brothers, the convenience food distributors, jumped 50p to 1,065p on a tip sheet comment; Staveley Industries, the engineering and salt group where Guinness Peat has built a stake and made threatening noises, put on 8.5p to 119p. New management has been drafted in and a revamp is underway. But new chief executive Chris Woodwark, former chief executive of Rolls-Royce Motors, is not planning many disposals. The loss was pounds 74.1m against a pounds 16.6m profit.

Card Clear settled just 0.5p lower at 62p, after touching 59p, following Tuesday's sudden departure of two directors.

Chieftain, the insulation and fireproofing group, tumbled 44p to 68.5p after talking about a trading slowdown.

HOWLE, AN engineering group, jumped 9p to a 36p peak, after a sharp profits advance - and the arrival of David Abell, former head of the Suter conglomerate. Mr Abell runs Thomas Jourdan, famed for its Crosby trouser presses. Since he and associates moved in he has been threatening action and a 22.26 per cent stake in Howle is the first significant move. The shares were mainly acquired from Strand Associates which accepted 9.5 per cent of Jourdan in exchange. Jourdan, expected to bid for full control, firmed to 69.5p.

QUEENSBOROUGH, the leisure group, held at 24p. David Kirch's Channel Hotels & Properties has increased its stake to 16.7 per cent. Queensborough's creator and biggest shareholder is Kevin Leech of ML Laboratories.

YET ANOTHER profit warning from Future Integrated Telephony left the shares 4p off at a 30p low. The company expects a loss of up to pounds 1.3m.