Market Report: Bears spy dead cat as last three-weeker winds down

IS THE worst of the bear market over - or was yesterday's dramatic resurgence merely a dead cat bounce?

Views were mixed in the stock market as the FT-SE 100 share index recovered 48.9 points to 2,980.8, its best one-day gain since February.

Optimists were encouraged by the behaviour of the currency markets, the strength of government stocks, up three-and-a-half- points, and the way a hesitant New York opening was ignored.

But the bears took the view that inflationary and interest rate pressures remained, the market was due for a technical rally and the advance, like the retreat, was achieved against the background of modest turnover.

Labour's threatened clamp on dividends and hostile takeover bids could erode the exuberance when trading resumes today.

The run-down of the market's last three-week trading account was another factor cited in the debate. End-account influences were clearly evident, but there was also relief that the second three-weeker in succession was at last coming to an end.

Still, many traders were encouraged to witness a near-forgotten sight - double-figure gains stretching through the list. The sharp gains by gilts reflected much more settled conditions in European bond markets.

Financials were at the forefront of the equity advance. National Westminster, helped along by bullish comments from UBS, rose 20p to 444p. Abbey National improved 15p to 410p and Barclays 19p to 519p.

But HSBC had a difficult time, falling 9p to 704p. The placing of its enhanced scrip dividend shares did not go smoothly; an event that, some suspected, filtered through to Hong Kong before the London market was aware of the problem.

Bid rumours surfaced among insurers with Royal Insurance, up 17p to 259p, seemingly in the frame.

Waters bubbled contentedly, helped along by yield considerations and continuing speculation that Ofwat's pricing policy will not be as draconian as some had feared. Electricities also joined the party.

Boots responded to its results with a 22p gain to 527p, helping other retailers to edge forward.

The arrival of an Arab prince willing to pump cash into Euro Disney prompted a 15p gain to 365p; Rank Organisation enjoyed an SG Warburg buy recommendation, gaining 20p to 379p.

Thorn EMI rose 12p to 1,042p as the market continued to anticipate benefits from the suggested demerger of its music side.

But there were the inevitable casualties: VSEL dived 50p to 928p as it warned profits would be 'broadly in line' with last year's pounds 61m against the pounds 65m expected; Vosper Thorneycroft, sank 24p to 740p as it was confirmed it had lost an Australian minesweeper contract that could have been worth pounds 45m over five years.

Eurotunnel survived the latest revelations about difficulties over its cash call with the rights shares trading at 43p and the old at 336p.

Alfred McAlpine, the construction group, retreated 18p to 241p in response to its pounds 25m cash call; Associated Nursing gave up 9p to 275p following a pounds 9.9m rights. But Faber Prest, a distributor, gained 10p to 499p after an pounds 8.3m call.

It was a good day for newcomers. Cassell, the publisher, placed at 143p closed at 151p; Denby, a household products group, moved from a 130p sale price to 137p.

Sykes-Pickavant, a tool maker, jumped 25p to 75p as a French group announced an agreed pounds 7.8m bid of 77p a share.

Burmah Castrol rose 9p to 873p following the pounds 68m sale, with a pounds 40m-plus profit, of its Singapore property. BAT Industries improved 17p to 419p with securities house Salomon Brothers said to be aggressively buying ADRs.

Lonrho, thinking about floating some of its African interests and collecting a buy recommendation from James Capel, gained 3p to 138.5p.

Quayle Munro, an Edinburgh merchant bank, held at 185p as Meespierson, the Dutch merchant bank, disclosed a 4.98 per cent interest.

Rhino, the video games retailer, was again friendless, easing 1p to 26p. Smith New Court was said to be negative, fretting about the games slowdown. The shares peaked at 67p in December, about the time it raised pounds 12.4m in a cash call at 44p.

Unit, a maker of timber pallets, rose another 5p to 45p, reflecting a successful rights issue and new management.

Tullow Oil is attracting attention. The shares rose 1.5p to a 36.5p peak with turnover reaching 7.5 million. They have been rising steadily on expectations of a rich strike in Pakistan. Hopes are high that a field along the Sulaiman mountain range has impressive oil and gas reserves. Tullow has a 15 per cent interest in the drilling consortium, led by British Gas.

Leisuretime Inns, traded at 15p on the 535 market, is raising pounds 940,000 at 10p a share. It is buying Dinercorp, which runs two US-style portable restaurants trading as Fatboys. Six leasehold pubs are also being acquired from Harmony Property. The deals will cost pounds 600,000 in shares. John Main of Harmony and Barry Cox, former Hard Rock Cafe chief, will join the board.

The FT-SE 100 index recovered 48.9 points to 2,980.8 and the supporting FT-SE 250 index 18.6 to 3,556.3. Turnover was 613.9 million shares with 26,144 bargains. The account ends today with settlement on 13 June.

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