MARKET REPORT: US cavalry gallops to London's rescue

American investors galloped to the rescue of a retreating stock market. At one time it looked as though the FT-SE 100 index would end the first week of the year nursing a substantial fall.

But prices perked up when the US interest became apparent. Although buying was light and extremely selective it was enough to produce a modest domestic response and the index closed 32.7 points higher, just half a point below the level it started the year.

Even so, the 55.1-point swing will offer encouragement when the market, in line with much of the country, returns to full-time working on Monday.

In early trading the fear of higher US interest rates unsettled shares. But with New York ignoring the pressure, a buy programme by Swiss Bank Corporation and a futures squeeze, shares, which began the week with a whimper, ended it on a high note.

Electricities again created excitement but another current of speculation, for once, failed to power much buying interest as criticism continued to grow about management salaries.

Yorkshire closed 10p higher at 740p, after touching 755p, as Swiss Bank admitted it had 8.24 per cent "held as a market-maker''. It has also told Northern Electric, where Trafalgar House has bid intentions, that it has 3.46 per cent of the group, again claiming market-making reasons.

Worries the Trafalgar bid could be referred to the Monopolies and Mergers Commision continued to overshadow Northern shares, down 10p at 978p. South West ended 9p down at 852p after a 6.1 million share buy-back at 860p.

In heavy trading, BSkyB was little changed at 246p as the Goldman Sachs support exercise came to an end.

British Airways rose 18p to 383p on the much better-than-expected December traffic figures, but Reed International came under late pressure on a rumoured Smith New Court downgrading. The shares fell 15.5p to 793.5p.

BT was another strong performer, gaining 8p to 387.5p; investment meetings are due next week. Eurotunnel's remarkable revival continued with a 10p advance to 315p.

Hope the Indian government will announce a £1bn Hawk aircraft order over the weekend was enough to inspire British Aerospace 12p higher to 436p. But Rolls-Royce, which should be in the running for power station orders worth £660m, fell 1.5p to 171p. GEC,also in the Indian contracts frame, gained 6.5p to 277.5p.

Coal Investments jumped 11p to 88p after a series of shareholding disclosures. The investor Nicholas Berry, a long-standing supporter, has lifted his interest to 14.1 per cent. Waverley Mining, accompanied by vague bid talk, put on 7p to 115p.

Dixons, with half-year figures on Wednesday, rose 5p to 198p. The market is looking for £27.5m against £17.3m. Cray Electronics, also to produce interim figures on Wednesday, dipped 5p to 150p. NatWest Securities expects £10.3m, up from £7.8m. United Biscuits, with Smith New Court support, gained 7p to 324p.

Retailers looked more settled with belated recognition of the Next upbeat trading statement leading to an 8p gain to 263p.

Virtuality's heady run continued, with a 15p gain to 267p. The shares have climbed 46p this week, seemingly on the actions of one persistent buyer. But there are now suggestions the computer games group could find itself a takeover target.

Oxford Molecular fell 2p to 74p as it duly confirmed it was in talks to buy a US group. Details should be released in two weeks. Cambridge Isotope Laboratories, in demand following a settlement with a former director which led to a buy-back of 16 per cent of its shares, gained 5p at 43p.

Cowie, the cars and leasing group, advanced 12p to 240p on the success of its rights issue and Kunick added 1p to 16p following its five-year amusement machines deal with Whitbread.

Wembley stuck at 5.5p. Guinness Peat, the investment group run by the New Zealander Sir Ron Brierley, has notified a holding of 25.95 per cent of the convertible preference shares. It has just 1,001 ordinary shares.

Moves to restructure Wembley are under way but any proposals will need the Brierley support.