Market Report: Water stocks rise as DTI plans are revealed

It was hardly the response the Government hoped for. On the day Margaret Beckett, the President of the Board of Trade, unveiled the Government's consultation paper on the future of utility regulation, stocks in the water sector soared. Not quite the consumer-friendly message that the spin doctors would have wanted to send.

In fact, the two events were not directly linked. The gushing water shares seemed to stem from a presentation to analysts by Thames Water on Tuesday, which played down fears that the entire sector was heading for a big confrontation with the regulator over the next price review.

Thames Water put on 28p to 1,028p, while Anglian Water ended the day up 24p at 930p. Hyder gained 15p to 977.5p and Severn Trent was 18p better at 1028p.

Multi-utility United Utilities gained ground on the same factors, as well as the news that it had formalised its joint venture with electronics group Nortel to develop a technology which allows electricity wires to carry telephone calls and internet traffic. The shares gained 26p to 881p.

Meanwhile, other electricity and gas shares took the news that the Government wants to merge their respective regulators - Offer and Ofgas - in their stride. BG, the most heavily regulated arm of the former British Gas, shaded 0.25p to 317.75p.

Of the few remaining electricity firms Southern Electric dipped 5.5p to 538p while National Power finished down 14p at 571p and PowerGen gave up 6p to 804p.

The Footsie continued to pause for breath after the headlong rush towards the 6,000 mark that marked most of the first quarter. Having seen their year-end forecasts for the index smashed within weeks, most equity strategists are advocating caution as they decide where shares will head next. Despite briefly edging above 6,000 in the morning, the Footsie ended the day down 15.9 points at 5967.8.

One notable casualty was Carlton Communications, which dipped 25p to 460p on a downgrade by NatWest. Analysts reckon first-half figures from Michael Green's media group will suffer from lower profits in Broadcast Television and a downturn on the Vision and Sound Products side.

The broker has also slashed its valuation of British Digital Broadcasting, Carlton's joint venture with Granada, to pounds 200m from pounds 920m on fears that programming costs will rise.

A "buy" recommendation from Dresdner Kleinwort Benson lifted shares in Boots 14.5p to 932.5. An upgrade from the same broker also boosted Sage, the accounting software group, which put on 15p to 1352.5p.

Cable & Wireless dialled a 16.5p gain to 754p on rumours from France that it is about to sell its stake in French mobile operator Bouygues. Selling the holding, which is estimated to be worth about pounds 600m, would go a long way to realising the pounds 1bn of disposals targeted by C&W's chief executive, Dick Brown.

The bubble of bid speculation burst on hotels and betting group Ladbroke, which tumbled 16p to 342p. Railtrack's pounds 17bn investment programme got the thumbs up from the market, with the shares steaming ahead 43.5p to 1,033.5p.

Capital Radio tuned into an 18p gain to 700p ahead of City briefings next week. The company is preparing to update analysts on the performance of its restaurant division. The stock suffered last year after Capital bought the My Kinda Town restaurant chain, but has risen by 40 per cent so far this year.

Savoy 'A' shares continued their retreat as the chances of a bid for the hotel group emerging in the near future receded. They closed down 135p at 1,665p, having peaked at 1887.5p a few days ago.

Vickers, in the process of selling its Rolls-Royce luxury car unit, firmed 7.5p to 233p as Volkswagen confirmed it had put in a bid. Catalogue retailer Argos fired another salvo in its defence against a 570p a share hostile bid from rival GUS, and was rewarded with a 13p share price hike to 620p. GUS eased 2p to 777p.

A stronger-than-expected set of final results from House of Fraser boosted the shares 14.5p to 170p. Less than six months ago, they peaked at 228.5p.

Shares in supermarket group Somerfield dipped 2p to 343.5p as Dairy Farm, the Hong-Kong based food retailing outfit, confirmed that it had placed its 11 per cent stake, pocketing a cool $279m (pounds 167m) in the process.

Upbeat figures from Barratt, the country's largest housebuilder, pushed its shares up 13p to 319p and gave the rest of the sector a fillip. Bovis Homes put on 6p to 270p while minnow Linden, also reporting results, added 13p to 199.5p.