Market Report: Blue chips soar on interest rate cheer

BLUE CHIPS enjoyed another interest rate bounce with Footsie surging 132.2 points to 5,606.2. Trading was often busy with indications that institutional investors were chasing selected shares.

This week's US interest rate cut and a growing conviction the Monetary Policy Committee will feel obliged to trim rates when it meets next month spurred the sudden outbreak of enthusiasm. Jockeying for position ahead of today's futures expiry could also have been an influence.

But it was very much a stock market of two halves. Mid caps staged only a moderate advance and the small cap index suffered the indignity of completely ignoring the ebullience of its peers, falling 3.5 points to 2,049.3.

Financials, which have a powerful influence on Footsie, attracted strong support. Barclays, down to 838p when the bears were savaging the market last month, scored a near 7 per cent gain to 1,273p. Credit Lyonnais is looking for a 1,500p level.

Standard Chartered, despite an ABN Amro profit downgrading from pounds 790m to pounds 700m, put on 36.5p to 660.5p and Bank of Scotland gained 46p to 630p.

Once again there was a buzz of corporate action around financials. The excitement engulfed insurers like Prudential Corporation, linked with Halifax, and GRE, thought to be an AXA UAP target. The Pru gained 38p to 855p and GRE 6p to 305p.

P&O, the shipping line, led the blue chip convoy with an 82p surge to 669.5p. Relief that the impact of the Asian crisis on its half-owned container shipping business, P&O Nedlloyd, seems to be easing prompted the recovery.

Siebe encountered a sudden attack of the jitters, falling 10.5p to 208p. Figures were at one time expected today but the results date is now Monday. The delay prompted doubts whether the engineer will after all achieve market hopes of a 13 per cent gain to pounds 246.5m. And BTR was also an absentee from the Footsie party, falling 3p (after 8.5p) as analysts, visiting its main US operations, fretted about the tough trading conditions the old conglomerate was encountering.

Land Securities fell 8.5p to 803.5p. The property group has said second- half profits will be unexciting and CSFB put out a sell recommendation.

British Petroleum, off 3.5p to 933p after an early 19p gain, was another out of favour. Forecasts of weak crude prices did not help; nor did a story of a large share placing. The Kuwait Investment Office, which once had a controversial 30 per cent interest, still has 6.17 per cent. It was said the KIO wanted to ditch its BP shares ahead of the mammoth merger with Amoco, the US oil power.

BP shares have enjoyed a strong run on the back of the merger as institutions have been obliged to increase their exposure to what, when the deal goes through, will be the biggest Footsie constituent.

Storehouse was the latest retailer to underline the retail gloom, falling 27.5p to 134.5p. Panmure Gordon said sell. Arcadia, where a profit downgrading is likely from Warburg Dillon Read, slipped 13.5p to 258.5p. Debenhams lost 11p to 360.5p and MFI, the furniture chain, found yet another low, 32.5p, off 1p.

Hanson, the building materials rump of the old, once-feared conglomerate, went in the other direction, hitting yet another high, up 20p at 455p.

Reuters, the information group which met six institutional investors at Henderson Crosthwaite, improved 14.5p to 607.5p.

A late spurt at brewer Marston Thompson & Evershed prompted thoughts that Wolverhampton & Dudley Breweries may be on the verge of producing its signalled bid. The shares frothed 13.5p higher at 237.5p with some speculators prepared to pay 242p a share. Any Wolverhampton and Dudley bid would, it is felt, have to nudge 300p to be successful.

BG rose 7.5p to 410p, despite HSBC caution. Vodafone, another HSBC target, rose 15p to 894p.

LLP, the Lloyds List publisher, jumped 39p to 272.5p on its merger with IBC, up 72.5p to 437.5p.

Danka Business Systems' troubles deepened with the shares plunging 18.5p to 38p as the threat of bankruptcy loomed. Three years ago the shares were 848p.

Dialog Corporation, the on-line information provider which used to be called MAID, crashed 76.5p to 89p after missing its third-quarter revenue target.

Charriol, a vehicle for takeover action which arrived on the market earlier this month, jumped 6.5p to 84p. The group is valued at pounds 4m. It was floated at around 70p.

South Beach Concepts, the catering group offering American-style food and drink, held at 1.25p. Licensed dealer Everett Financial Management, which picked up a 9.6 per cent stake buying new shares earlier this week, is not wasting any time dribbling out stock. It now has 6.74 per cent.

SEAQ VOLUME: 969.2 million

SEAQ TRADES: 64,984

GILT INDEX: 112.86 +0.07

DAGENHAM MOTORS revved up a further 25p to 177.5p as bid speculation continued to swirl around the Ford dealer. A joint venture between the Ford car giant and Jardine Matheson has signalled its interest and could, it is thought, bid today. Dagenham's assets are about 180p a share and a 200p-plus offer is expected. The shares were down to 96.5p a year ago and have climbed from 125p this month.

ACORN, the computer group, rose 9p to 67.5p; it continues to wrestle with the disposal of its shares in Arm, the computer chip group. The stake, with Arm up 125p at 1,100p, is worth around pounds 130m.

Acorn wants to restructure without suffering from the taxman but is uncertain whether it will be able to do so. Even allowing for tax the Arm shares should be worth around pounds 90m against Acorn's pounds 61m capitalisation.