Market Report: Spotlight on BT as takeover talk keeps Footsie moving

Takeover speculation provided just enough interest to keep shares, if not very convincingly, on the up-road.

Footsie ended 42.5 points higher at 4,806.8 although volume remained subdued. More settled Far Eastern markets and the latest Merrill Lynch survey showing fund managers more confident about shares helped sentiment. But it was the conclusion of BT's much-criticised US adventure and another round of stories about further financial consolidation which really gave the stock market something to latch on to.

BT, easily the most actively traded share, was dialled 11p higher to 465p as the market drooled over the likely direction of the near $7.5bn which is due to flow into its coffers. Another special dividend; another bid?

The telecommunications giant paid a 35p a share special dividend in September as part of its MCI involvement. Then, of course, it was blissfully unaware of the counter-bids which would destroy its American dream of absorbing MCI as part of its bid to become a global force.

With its international aspirations in tatters, BT needs a new target - Cable & Wireless, which it once came close to taking over, emerged as the market's favourite.

C&W, weighed down lately by its Hong Kong connection, rose 15.5p to 481.5p. Last year on-off merger talks with BT collapsed, ending hopes of creating what would then have been a pounds 34bn group.

Securicor, up 10p at 283.5p, could also enjoy a BT dial-in. BT controls with Securicor the Cellnet mobile telephone network and has made no secret of its desire to take full control. In the past Whitehall has blocked such ambitions but a change of Government and BT's necessity to be a world power could prompt a rethink.

Legal & General, at one time up 20p, was another to attract attention. The insurance group, to the surprise of some, suddenly emerged as a possible target for Barclays, still struggling to sell its securities operations.

The big banks are known to be casting around. And an inspired insurance deal would do much to restore Barclays' image after its BZW fiasco. Norwich Union, 4.5p stronger at 361.5p, remains the market's favourite for either Barclays, 30p up at 1.512p, or Lloyds TSB, 8p firmer at 7747p.

Hambros, said to have turned down a German approach, rose 7p to 257.5p and Schroders continued to experience its order-driven trading roller- coaster, gaining 74p to 1,700p. Abbey National improved 26.5p to 976p.

Despite new reports of poor sales EMI spun 12p higher to 500p and Rank, on talk of Hard Rock Cafe expansion, edged ahead 3p to 345p.

Not all telephone shares made headway. Ionica had another dismal session, finding yet a new low of 277.5p, off 22p. The shares arrived in the summer at more than 400p.

Takeover action among the second-liners was again evident. Ransomes, the lawnmower group, improved 9.5p to 57.5p on an pounds 83.2m US bid and debt collector Intrum Justitia added 17.5p to 91p on the possibility of a management buyout.

Cairn Energy flared 23.5p to 452p after an encouraging Bangladesh progress report. The shares were 634.5p in March.

RioTinto, the resources giant, hardened 14.5p to 765p, helped along by Dresdner Kleinwort Benson and Societe Generale Strauss Turnbull support; Bass was encouraged by a Goldman Sachs recommendation, up 14p at 824p.

Havelock Europa, the shopfitter battered last week by a profits warning, firmed 1.5p to 153.5p as the nine-strong board waded into the market, buying 56,000 shares at 156p. The warning smashed the shares 108p to 142p.

American Port Services slipped 8.5p to 164p. The acquisitive transport group Jacobs has picked up nearly 2 million shares lifting its stake to 9.9 per cent. Jacobs' spree cost pounds 3.2m.

SFI, the old Surrey Free Inns, firmed 2p to 118.5p as stockbroker Henry Cooke Lumsden forecast a profits surge from pounds 2.2m to pounds 5m and then pounds 6.5m.

Tele-Cine-Cell, a broadcasting group, fell 4.5p to 40.5p after calling off talks with a potential bidder.