Market Report: US influences send Footsie up near record levels

Market report

American influences propelled Footsie to within hailing distance of its peak. US buying and an impressive New York display lifted the blue- chip index 89.1 points to 5,326.3 - just 4.5 shy of the high hit in October last year.

Until the last 30 minutes it seemed the stock market would enjoy a record close but a little late selling destroyed such hopes.

Once again it was a blue chips' party. The rest of the pack was left on the sidelines, with the FTSE 250 index and the FTSE SmallCap index posting falls.

One of the more astonishing aspects of the market over the past year has been the heady progress scored by blue chips while second and third liners have limped lamely behind. Few experts see much sign of a catch up. Malcolm Morgan of ABN Amro Hoare Govett, which produces the HG Smaller Companies Index, says the investment house remains "cautious" about short- term prospects for the small fry.

Last year the HG index, measuring the smallest fully listed companies, scored a 9.5 per cent gain compared with the 23.6 per cent advance of the FTSE All share index.

It was a familiar story yesterday. Blue chips were led higher by drugs, financials and oils; there was no obvious pattern in the rest of the market.

Drugs were inspired by run-of-the-mill returns by American Home Products, proposed partner of SmithKline Beecham, and better-than-expected figures from two other US groups, Merck and Schering-Plough.

SB rose 44p to a 768p peak on the theory its hand in the merger negotiations was strengthened by AHP's under-performance as well as the hope its own display mirrored Merck and SP. Glaxo Wellcome was able to sit back and enjoy the scenery, gaining 65p to 1,605p.

Zeneca was in the sickbay as its trading statement was judged unexciting; the shares, near their peak, lost 62p to 2,350p. Goldman Sachs, however, came out with a 2,700p target price.

Firmer crude prices and positive comments from Dresdner Kleinwort Benson and NatWest Securities was behind oil strength. British Petroleum flared 31p to 784p; Enterprise Oil 25p to 565p and Shell 19p to 410.5p.

Financials, anticipating more corporate action, were led higher by Norwich Union, up 23.5p to 441p. Lloyds TSB put on 30p to 835p and Halifax 13p to 845p. Legal & General, 10p better at 610p, was helped by Panmure Gordon support.

General Electric Co put on 6p to 374p on the signalled arrival of Sir Roger Hurn as chairman.

British Steel, an obvious casualty of sterling's strength, went to a 12-month low, falling 3p to 124.5p. Rio Tinto, the metals group, produced a quarterly production report which appeared to prompt BZW to cut its profits forecast from pounds 861m to pounds 705m.

Utilities remained subdued with National Power off 14.5p to 650.5p. Southern Electric, the last of the electricity dozen to hold on to its independence, brightened 16.5p to 531p as the market banked on a bidder materialising, Associated British Ports rose 12.5p to 307p with Merrill Lynch forecasting a 400p level.

Northern Foods, demerging its milk rounds, ended 9.5p off at 274.5p as Credit Lyonnais Laing lifted a sell sign. "The sum of the two parts is worth less than the merged whole," analyst Sally Jones said.

Hopes cancer cases will be dropped lifted Gallaher 16p to 379p and Imperial Tobacco 7.5p to 453p.

Powerscreen and Premier Farnell provided the profit warnings. Financial irregularities more than halved Powerscreen to 254p; Premier's warning and the departure of chief executive Howard Poulson left the shares 42.5p off at 296.5p. Disappointing profits clipped Danka Business Systems 17p to 290p and Electrocomponents fell 21p to 451.5p.

Tullow Oil recovered most of a 10p fall, ending at 146p. It rejected ownership plans for the important block 9 field in Bangladesh put forward by US giants Chevron and Texaco which would give it 20 per cent of the exploration. Tullow is thought to be in a strong position and may attempt a deal with other oil companies.

JD Wetherspoon, the expanding pubs chain, held at 297.5p. SG Securities cut its profits forecasts from pounds 26.8m to pounds 23.3m and from pounds 37.9m to pounds 34.9m. A slowdown in the pub opening programme and introduction of oversized glasses prompted the revisions.

BKG Resources, the old Bakyrchik, fell 0.5p to 9p after the Kazakhstan gold mine, where it has a 20 per cent interest, was put on a care and maintenance basis.