Market report: Zeneca surges on Astra rumours

IT WAS drug group Zeneca's turn to go on a high. The fickle stock market, which has relentlessly pursued the theory that Glaxo Wellcome will, after all, take out SmithKline Beecham, suddenly switched its attention to the former Imperial Chemical Industries off-shoot, sending the shares 77p higher to 2,625p in busy trading.

It latched on to a story that Astra, the aggressive Swedish group, planned a get-together with Zeneca.

Astra is thought to be on the verge of clinching a deal to buy the outstanding 50 per cent stake in a joint venture with the American Merck group. Such a deal would clear the way for Astra to merge with another major drugs group, achieving a long-held ambition.

Some believe Astra has already offered the gentlest of hints that it is looking at Zeneca.

Other drug shares took a breather with Glaxo and SB giving ground.

CS Securities made cautious noises about Zeneca. It trimmed profit expectations and said the shares were no more than a hold.

After Wednesday's Herculean effort the stock market fell back. Footsie started brightly enough, gaining 38.7 points in the first few minutes. But a set of heady retail sales figures transformed the atmosphere. Suddenly another interest rate increase looked all too likely and Footsie reversed, swinging to a 63.7 loss. It closed at 5,812.1, off 20.6. Supporting indices remained uncertain with the mid cap off 24.7 to 5,659.2.

Today's double witching, when FTSE futures and options expire, created uncertainty. Indeed the Stock Exchange appeared to be so nervous it was moved to write to firms underlining the danger of volatile trading and the need to take care when dealing for clients.

The last double witching produced chaos, with Footsie suspended as BG broke through the 20 per cent movement barrier. In the hectic 20 minutes when derivative deals were settled Footsie lurched from a 117 fall and then staged a 225 surge as shameless attempts were made to produce a reading which suited derivative players.

The double witching is not a new development. But the whole exercise has become much more volatile now order-driven trading dominates the Footsie calculation. Small orders slipped on the order book can have a dramatic impact on share prices and consequently the index.

Orange was the best performing Footsie constituent, up 29p to 510p with Merrill Lynch providing a friendly push. Vodafone gained 11p to 716p, helped by support from Lehman Brothers, but Telewest Communications was disconnected, off 4p to 127p as merger talks with NTL ended.

Sema, the computer group, firmed 31.25p to 727.25p on talk of a US deal but Micro Focus lost 67.5p to 452.5p following a pounds 323m US swoop.

Pilkington, the glass maker, found an analysts' trip to its Italian operations a mixed blessing. SBC Warburg was among the investment houses to suggest a sell; SG Securities advised a buy. The shares cracked 4p to 120.5p.

Cliveden, the hotel group which has attracted Microsoft's Bill Gates, rose 2p to 93.5p. There had been hopes that the bid, 95p a share, would be pitched in the region of 115p, even 125p. First Choice, the holidays group, duly produced deals, the pounds 134m takeovers of Unijet and Hayes & Jarvis. The shares rose 15p to 167.5p.

BTP, the chemical group, improved 8p to 543.5p with Merrill highlighting prospects of further expansion and putting a 620p target on the shares.

House builders faced a demolition job as Schroders warned on the sector, drawing attention to the slowdown in house sales. Barratt Developments lost 10.5p to 307.5p and George Wimpey 6p to 128p.

Sketchley, the cleaning and photographic group, retreated 4.5p to 37p as the long awaited bidder decided to walk away. Talks to sell the group's retail spread, the dry cleaning and SupaSnaps chains, are still dragging on.

British Regional Airlines made its debut, touching 171.5p against a 150p placing. However such an altitude could not be maintained and the shares ended at 156.5p in busy trading. Anglo Siberian Oil also appeared, ending at 106.5p against a 100p placing.

Robert H Lowe, the packaging and printing group, fell 4.5p to 15.25p on a profits warning and Celebrated, a restaurant operation, fell 2.5p to 8.5p on disappointing profits.

Aromascan, the electronic nose group, lost 3.5p to 10.5p following the departure of chairman Richard Lyman. Year's figures are due. In 1996 the shares were 182p.

Caledonia Investments, the Cayzer family company, added 38.5p to 975p. Schroders is understood to have suggested a fair value price of 1,000p.

Zergo, the computer group, firmed 2,5p to 395p. The AIM-traded group intends to place around 8 million shares ahead of its move to a full listing in a month's time. It plans to raise around pounds 15m. Analyst Ingrid von Hentschel at stockbroker Beeson Gregory believes the company is unlikely to be profitable this year because of heavy research and development and marketing charges.

TADPOLE TECHNOLOGY, the struggling computer group, is thought to be attempting to put together a cash-raising exercise with shares offered at 10p. One suggestion is that the stockbroker Williams de Broe is trying to get a rights issue underwritten. Some of the cash could be used to buy a US group which is regarded as a rival to Tadpole. The computer company has had a hair-raising stock market ride since it arrived six years ago. At one time the shares touched 432p. They closed at 17p, off 1p.

HW, a specialist recruitment consultancy, will come to the stock market next week. Shares have been placed at 160p, pricing the company at pounds 42.5m. It specialises in finance and legal staff. Profits last year increased 67 per cent to pounds 3.9m.

SEAQ VOLUME: 882.5m

SEAQ TRADES: 66,279

GILT INDEX: 104.96 +0.06