Market report: Upbeat Footsie relegates ICI from bellwether status

Calm returned to the London market yesterday as institutional investors chose to sit on their hands after the recent ructions on both sides of the Atlantic.

Dealers ignored the poor second-quarter results from ICI, a former bellwether stock, to focus on Nationwide Building Society's quarter-point rate cut, bullish noises from high street retailer Boots and a firm start on Wall Street. The Footsie closed just off its intraday high at 3684.7, a gain of 15.9.

ICI fell 17p to 761p as brokers downgraded their estimates. Boots, on the other hand, put on 15p to 599p after reporting a 5 per cent like-for- like sales increase at Boots the Chemist in the first quarter, while its DIY arm Do It All showed an underlying increase of 8.4 per cent.

The positive news from Boots also lifted shares in cosmetics retailer Body Shop which closed 11p higher at 193p, a level last seen at the end of 1994. Earlier this year Anita and Gordon Roddick abandoned plans to take the company they founded private. The shares have subsequently rebounded - just as they did when Alan Sugar tried a similar buy-back trick with Amstrad a few years ago. Talk of Body Shop pursuing a more progressive dividend policy has attracted buyers, though last month Ian McGlinn, the reclusive former garage owner who made millions by investing pounds 4,000 to open Mrs Roddick's second shop in 1976, cashed in some of his fortune.

Bid activity, real and rumoured, was also in evidence.

Hays' pursuit of fellow distributor Christian Salvesen could result in an agreed bid worth over pounds 1bn. It is seeking an early meeting with Salvesen's board and hopes any offer will be recommended. Shares in Salvesen soared 60p to 349, while Hays slipped 26p to 414p.

Confirmation of an offer for mini-conglomerate Suter pushed the shares 18p ahead at 215p in trade of 7.9m. Ascot Holdings, the bidder, relinquished 27p at 334p.

Takeover whispers also returned to the electricity sector. East Midlands touched 585p in hectic trade sparked by a rumour it will find itself on the receiving end of a hostile American bid worth 700p next week. The shares ended the session at 571p, up 32p. The speculation ignited interest in the rest of the sector, with London Electricity 10p better at 605p, Yorkshire 9p ahead at 663p, Southern 7p to the good at 657p while Northern rose 9p to 534p.

Lloyds TSB was the day's best blue-chip performer, adding 12p to 340.5p ahead of today's results. Strong results from its mortgage lending unit Cheltenham and Gloucester also helped.

Among the other significant gainers were Rolls-Royce at 224p, up 8p, and British Aerospace at 943p, 18p higher on the back of the Government's defence procurement decisions covering around pounds 4bn in of orders.

Shares in British Gas continued their good run this week, hardening 2 p to 193.5p following the company's move to recover around pounds 1bn, paid as gas levies, from the Department of Trade and Industry. Analysts thought the move was unlikely to benefit shareholders, however, suggesting that, if the claim was successful, the funds would probably be paid over a long period and would have to be distributed to the company's customers.

Dixons fell 10p to 483p on fears that the DTI will impose statutory pricing on the sale of extended guarantees.

Reuters remained friendless, falling another 17p to 686p on further consideration of its low revenue growth in results yesterday and concerns that the expected share buy-back may not be imminent.

Two buy notes breathed new life in biotech babe Chiroscience, 11p higher at 324p. Lehman Brothers' valuation model suggests the shares are worth 385p with a price target of 620p by the end of next year. The major contributor to this assessment is local anaesthetic drug levobupivacine, which makes up a third of Chiroscience's estimated worth, though no other product contributes more than 10 per cent. Williams de Broe is even more bullish, estimating a net present value of 528p.

News of "buoyant trading in recent months" from restaurant groups gave Pizza Express a fillip, sending the shares 28p higher to 398p. Pelican rose 5p to 144p in sympathy.

Software group Admiral was also in demand, rising 30p to 295p, after reporting an "excellent start" to the year.

However, shares in Wolstenholme Rink came down to earth. Over 1000p at the beginning of the month, they crashed 145p to 808p after the chemicals group issued a profits warning.

TAKING STOCK

rSterling Publishing continued its tentative recovery, adding 2p to 27p. Managing director Michael Summers picked up 75,000 shares at Wednesday's closing price, his second purchase in three days. The USM- listed publisher of international reference books and magazines has been struggling to restore confidence since a warning last year of problems with advertisers in the former Soviet bloc sent the shares tumbling from 100p to 20p. Last week Sterling posted reduced losses of pounds 2.6m after pulling out of Eastern Europe. House broker Credit Lyonnais looks for pre-tax profits of pounds 2.5m in the year to March.

rRPS moved 5p higher to 136p. The environmental consultancy which works with BAA on the Terminal Five extension at Heathrow airport posted record interim results.