Market Report: Blue chips take a breather in hectic trading

BLUE CHIPS, after stretching to yet another peak, paused for breath although shares on the stock market undercard took up the running.

It was another hectic day with rumours of corporate activity continuing to create excitement. In often squeezy conditions, some relatively modest deals had a dramatic impact on prices.

Footsie hit a 6,539.9 trading high, closing 19.5 down at 6,493.6. But the mid-cap index ended 45.1 higher at 5,637.5, still more than 300 below its peak, and the small cap index rose 15.3 to 2,443.9, nearly 350 from its high. Turnover was a heavy 1.3 billion shares.

Much of the takeover speculation was outside the charmed Footsie circle. London International, the condom maker that is involved in long-running bid talks, improved 15.5p to 167.5p in a sudden flurry of trading.

A US group is widely expected to be the predator. In January London International, an old takeover favourite, said it had received a "preliminary unsolicited proposal". The market was convinced a statement could appear today. But the company said: "An imminent announcement is not anticipated."

Others to capture the speculators' attention included Redrow, the builder, up 14.5p to 238.5p, and Rank, the leisure group, 15p higher at 249.5p.

Polypipe, the building materials group, actually encountered real bid activity. The shares jumped 36.5p to 193.5p after it said talks were on and Greycoat, the property group, rose 19p to 234.5p as it countered the Delancey Estates strike by offering itself to the highest bidder.

There was more excitement on the banking pitch. Barclays ended 25p higher at 1,944p and rumoured bidder Royal Bank of Scotland rose 19p to 1,444p. But Halifax, selling its estate agency chain, fell 8.5p to 855.5p. An upbeat trading statement and an expression of interest in the Halifax outlets lifted Countrywide Assured 11.5p to 155.5p.

Portsmouth & Sunderland Newspapers firmed 37.5p to 1,787,5p as hostile stalker Johnston Press increased its interest to 17.35 per cent.

St James Place, the life insurer, was busily traded, climbing 32p at one time on expectations that the Prudential Corporation, following the M&G takeover, will bid. But the gain was clipped to 17.5p at 297.5p as the parties involved poured cold water on the theory.

Burmah, the chemical group, had an eventful session. The shares were at one time riding 112p higher; they closed up 93p at 1,034p. The share performance, not surprisingly, fuelled rumours of bid activity. But the spark for the surge was probably two institutions charging in the market for stock and encouraging other buyers to take an interest.

Paper and packaging continued to benefit from the Scapa deal, with David S Smith gaining 10p to 133p and Arjo Wiggins Appleton moving ahead 8.5p to 171.5p.

British Steel was back in demand. The shares rose 10.25p to 149.75p with talk of analysts upgradings. CSFB was thought to have repeated its buy advice on expectations of industry get-togethers. The shares have fallen from 172p in the past year as trading prospects deteriorated. BS is expected to have suffered a loss approaching pounds 100m in the year ended last month.

BSkyB, the satellite broadcaster still smarting from its Manchester United red card, was switched on by Investec Henderson Crosthwaite (IHC). The shares jumped 18p to 559.5p after analyst Mathew Horsman lifted his target price to 630p from 580p.

The group's joint Internet service, Open, has prompted the IHC upgrade. Open delivers such treats as electronic home shopping and banking. Its base valuation is put at pounds 1.4bn, worth 27p to BSkyB and about 7p to the other major partner BT, unchanged at 1,075p. HSBC and Japan's Matsushita also have interests in Open. IHC is holding its BSkyB profit forecasts at pounds 130m for this year and pounds 183m for next.

Trying to spot the Buffett target was another factor behind some of the blue chip gains. Warren Buffett, the legendary US investor, has said he is near to declaring a 3 per cent stake in a British group.

British Airways, up 32.5p to 520.5p, is the new choice although Cadbury Schweppes remained in favour, firming 18.5p to 933p. Allied Domecq, up 18.5p at 485.5p, emerged as an outside runner. So did Ladbroke, the betting and hotel chain, with a 5.5p canter to 286.5p.

Imperial Chemical Industries was the best performing blue chip. The sage of Omaha could have been a factor but reports that it was at last near to clinching a major assets sale was probably the major influence behind a 47.5p jump to 635.5p. ICI's disposal programme has so far caused dismay with the industrial group failing to deliver the sales the market anticipated.

Airtours was little changed at 501p and rival Thomson was a shade firmer at 177.5p. WestLB Panmure rates the shares. There is also continuing speculation that Airtours could barge into the First Choice/ Swiss merger. First Choice rose 3p to 177p.

Eurotunnel gained 6.5p to 99p as the struggling group emerged as a telephony play. The Anglo-French operation is using the cross-channel tunnel's infrastructure to run a telecoms network and the service between London and Paris made up 70 per cent of last year's pounds 8.9m sales.

London Pacific, the latest Internet play, jumped 114p to 507.5p, a two- day gain of 288p. Pilat Technologies, on its broadcast systems sale, added a further 15p to 62.5p and textile struggler Dawson International knitted a 4p gain to 21p, seemingly on the back of buying by Guinness Peat, one of the market's more aggressive investors.

Preston North End, the football club, fell 15p to 330p; it raised pounds 60,000, placing shares at 328p.

BATM Advanced Communications, which has climbed from 145p to 483p in 12 months, lost a little of its exuberance, falling 19.5p to 463.5p. Figures are due later this month and the company said it intends to move to a full listing from AIM.

SEAQ VOLUME: 1.3bn

SEAQ TRADES: 89,023

GILTS INDEX: 114.12 -0.07

ELECTRONIC Fundraising, one of the fringe Ofex share market's best performers, is on its way to Nasdaq and, surprisingly, the Bermuda Stock Exchange. Negotiations for the share listings "are at an advanced stage", said chairman David Vanrenen. The company, which is involved in marketing lottery games on the Internet, suffered a pounds 901,000 loss in the three months ended March. The shares fell 5p to 325p, capitalising the group at pounds 21m.

CAMBRIDGE MINERAL Resources is to accelerate its diamond exploration in Ireland's County Donegal, by using airborne surveys.

The results so far from the two-year hunt have prompted the company, after evaluation by independent geological consultants, to move to the second stage of its programme, which has so far cost pounds 250,000.

CMR shares held at 8p; they have been 18.25p and were down to 5.5p earlier this year.