Exuberant oils make intriguing gains as Hardy annuals do round

The FT-SE 100 index recovered from a 23.6 points fall to close 9.4 higher at 3,209.3 but the FT-SE 250 index lost 7.3 to 3,497.8. Turnover was 602.3 million shares with 23, 285 bargains. Government stocks were little changed.

When shares are flying high rumours of corporate action swirl around the stock market. With oils displaying a rare degree of exuberance it is, perhaps, not too surprising that some of the more ancient rumours are being dusted down and presented to a clearly sceptical investment community.

A Clyde Petroleum merger with Hardy Oil & Gas is the story that has returned to tease the market. Such a deal has been mooted for some time and would clearly make sense.

Hardy, valued at about £190m, is the larger of the two and would presumably be the vehicle for any get-together. Its shares were unchanged at 168p; Clyde rose 1p to 47p.

The rest of the oil sector, if not as enthusiastic as last week, produced some intriguing gains as the crude price once again edged ahead. British Petroleum was again the star performer, rising 3.5p to a new peak of 454.5p.

The rest of the market ended a volatile session with a 9.4-point gain at 3,209.3. A sprinkling of programme trades helped inflate what would have been a subdued turnover.

Worries about the deteriorating Lloyd's of London position, with the fear names will be forced to dump shares on a reluctant market, ensured a hesitant start. Anxiety about currencies, heightened by this week's G-7 meeting, and the consequent impact on interest rates also took their toll. The presence of a big futures seller also curtailed early trading.

Abbey National, the building society cum bank, was the star of a moderately active financial sector. It jumped 11p to 480p with Smith New Court, which met the company on Friday, leading the buying charge.

Then, as the market closed, came the announcement that Abbey wanted to again talk merger with the National & Provincial Building Society. Its statement is likely to prompt other banks to declare their interests in the dwindling building society movement.

Other financial to move ahead included Barclays, thought to be near clinching a US securities takeover, and old takeover favourite SG Warburg. Barclays put on 5p to 639p and Warburg 8p to 751p.

The day's worst performer was Cray Electronics. Its shock profit warning sent the shares crashing 76p to 79p. The market had expected the group, often rumoured as a bidder for Racal Electronics, to produce £33m. Now, at best, it will break even. Racal fell 8p to 240p in sympathy.

Another to disappoint its followers, not for the first time, was computer group Wakebourne which had a distressing time when it was called Maddox. It said profits would emerge at around £1.8m against market hopes of £2.3m. The shares tumbled 17p to 45p.

VSEL, the shipbuilder, rose 28p to 1,638p, a peak, as the feeling grew that bidder British Aerospace would be cleared to bid. The market is convinced BAe will obtain no-strings approval whereas rival bidder, GEC, could be presented with unacceptable conditions about employment levels. BAe was little changed at 514p; GEC firmed 1p to 298.5p.

Cable and Wireless gave a little ground despite continuing rumours of corporate action. Inchcape put on 10p to 319p as James Capel changed its stance from hold to buy.

Glaxo celebrated the latest legal success of its Zantac ulcer drug with a 19p gain to 735p. But it faces further legal challenges later this year. Medeva, awaiting the possible Fisons bid, improved 7p to 254.5p; Fisons shaded to 178p.

Transport group Tibbett & Britten is being increasingly regarded as a takeover candidate. The shares rose 15p to 653p. They have come down from almost 900p in the past year.

Its recent results have not lived up to best expectations and a cautious trading statement has tended to underline the fierce competition in the distribution industry. Unigate, rumoured to be the most likely bidder, held at 381p.

Bass, likely to lose its top place in the beerage pecking order if the Scottish & Newcastle bid for Courage goes through, slipped to 542, despite a buy recommendation from Barclays de Zoete Wedd. The securities house is looking for profits of £586m (up from £552m) this year. The brewers' shares were hit last week by the surprise departure of heir apparent Phillip Bowman. BZW says his resignation will "not materially damage strategy".

Hillsdown Holdings firmed 3p to 182p as the cash arrived from the sale of its Maple Leaf operation in Canada to the Wallace McCain family, of oven chips fame. The acquisitive nature of the group prompts thoughts that it could hit the takeover trail again.

Hanson put on 2.75p to 238.25p. Lehman Brothers says the group's tobacco interests are undevalued judged against the price Compagnie Fianciere Richemont is prepared to pay for Rothmans International. The bid is worth 625p a share.

Shares of Merchant Retail held at 14p. It has agreed to sell three of its Normans supermarkets and is thought to be on the verge of clinching the disposal of the remaining 17. Its food operations have been hit by the fierce competition in the supermarket business. MR intends to concentrate on its Joplings department stores and Perfume Shop chains.

Mice, a display, design and project management group, held at 3.25p after producing better-than-expected profits of £471,000. The company, which arrived on the stock market in December, is thought to be eyeing acquisitions in the US and Pacific Rim. Both deals would represent reverse takeovers, dwarfing Mice, currently valued at £6m, and probably prompting a share suspension.