Investors turn to drugs and water to provide a surge

Takeover speculation in drugs and water shares came to the rescue of the stock market.

The pounds 41bn Swiss drugs merger put Zeneca on a high and Wessex Water's pursuit of South West Water lifted the temperature in the water sector.

The rest of the market tended to drift, awaiting the hoped-for interest rate cut and, in a few instances, ruffled by results.

Zeneca was comfortably the best-performing blue chip, soaring 96p to 1,377p in heavy trading.

The proposed Sandoz-Ciba Ceigy merger immediately concentrated minds on the moves it could provoke in the already bid-happy drugs industry. Zeneca, so often the rumoured victim of the two Swiss giants, was designated the most likely target for one of the other big groups threatened by the new Swiss concentration.

Roche, another Swiss group often linked with Zeneca, was seen as an obvious predator. Glaxo Wellcome, which this week admitted that it needed an acquisition to keep up its momentum, is also in the frame.

Zeneca's latest embarrassment in the glare of the takeover spotlight occurred when the group could have hoped to throw off the speculative yoke - by producing a splendid round of profits. But all the old arguments have returned to haunt it. It looks a sitting duck and unless it can grow through takeovers it will fall to a predator.

Glaxo shares, partly reflecting the possibility of bid action, fell 30p to 846p, a two-day fall of 74p.

SWW foamed 70p to 608p on the Wessex interest. The possibility of action among the other privatised water companies lifted Anglian 8p to 596p; Severn Trent 9p to 657p and Southern 39p to 736p. Wessex sank 20p to 324p.

The FT-SE 100 index ended 0.7 points lower at 3,758.2; the supporting index again demonstrated the growing resilience of second-liners, gaining 3.3 points to 4,280, its fifth consecutive peak.

Vickers, the engineering group famed for Rolls-Royce cars, retreated another 18p to 260p. GKN's declaration that it had no intention of bidding added to the damage done by Wednesday's indication that profits growth this year will be unexciting. GKN, with profits up 61 per cent, gained 35p to 877p. Cable and Wireless was actively traded ahead of a conference due to be held today by its Hongkong Telecom off-shoot. The shares ended firmer at 451p.

De La Rue dipped 25p to 721p following disappointment with the performance of its German subsidiary.

Banks were weak as interest rate cut hopes were seen to be diminished by the stronger-than-expected distributive trades survey. Standard Chartered retreated 13p to 625p as bid hopes faded.

Elsewhere Yorkshire Electricity, another which recently enjoyed high- voltage bid hopes, fell 18p to 775p. Supermarkets continued to score from projected food inflation, with Argyll up 13p at 316p and J Sainsbury 6p to 385p.

BSkyB, the satellite television group, jumped 24p to 423p following its German TV deal. Granada rose 11p to 739p on renewed hopes that it was near to unloading some of the assets acquired with Forte. Whitbread, 7p up at 708p, remains the favourite to buy the chain of Welcome Break motorway services areas. A decision is due this weekend on the sale of most of the White Hart country hotels to Regal Hotels, still suspended at 44p.

ViewInn, providing hotel guests with access to computerised data, held at 300p. The shares were floated in December at 100p. The market has been desperately short of stock, a situation which could be alleviated by the sale of 50,000 shares by GFM International, the US group.

Pan Andean, seeking oil and gas in Bolivia, jumped 6p to 47p as stories went around of strikes near one of its blocks. But Tullow Oil failed to sustain Wednesday's excitement on talk of British Gas interest, falling 1.25p to 78p. Clyde Petroleum was busily traded, gaining 4p to 66p on speculation of developments in Indonesia.

Capital & Western Estates, a residential property group arrived on AIM this week. The shares traded at 2p.

Renishaw, an electronic equipment group, surged 37p to 453p, reflecting an 87 per cent profit increase. A 58 per cent profit advance lifted More O'Ferrall, the advertising group, 38p to 585p.

Ransomes, the lawnmower maker rescued from near-disaster, held at 67p. Merrill Lynch believes profits this year could hit pounds 14.3m (against pounds 9.2m) with pounds 17.4m predicted for next year. Merrill is looking for an 80p target price.

TAKING STOCK

rQueens Moat Houses, the debt-laden hotel group, has experienced a see-saw week; yesterday gaining 1.75p to 19.25p, just below the best level achieved since last year's restructuring. On every yardstick the shares, which have been briskly traded this week, are expensive. But interest in them is fuelled by the suspicion corporate action could soon emerge. The reclusive Barclays brothers have been linked with the group and there have been suggestions Stakis, the acquisitive Scottish group, could be interested.

rRichard Conroy, who used to run Arcon International Resources, is thought to be near to bringing a gold mining company to the stock market. The new Conroy vehicle has interests in Finland. Professor Conroy quit Arcon 15 months ago.