Market Report: British Energy turns on the heat

Its been a week to remember for British Energy, the nuclear power group once regarded as the privatisation too far.

On Wednesday it was selected for Footsie membership and yesterday the soon-to-merge UBS investment house lifted its target price from 420p to 550p.

Its all a far cry from the summer of last year when the group came to the stock market. It was the most controversial of the Tory Government's share sales, prompting a fierce debate among the Government's advisers about the level the shares should be priced. In the end the company was offered at a knock down pounds 1.4bn. And on the first day of dealings the shares ended below their sale price with the partly paid down to 94p.

Since then the second instalment has been collected making the flotation price the equivalent of 203p.

The shares, up 4.5p to a new 441.5p high, give the group a pounds 3.1bn capitalisation.

Energy's latest progress occurred as Footsie ended a three day losing run, gaining a modest 9.3 points to 5,045.2 in thin trading. There were signs the market is already winding down for the Christmas holidays. Far Eastern worries continued to hover and there was vague unease about US interest rates.

Asda, firm at 173p, was thought to be on a cash raising exercise, reawakening expectations it has a major acquisition in its sights. Again attention was directed at Safeway, little changed at 344p.

Retailers, generally, remained unsettled on the slow build-up of the Christmas shopping spree. Dixons, however, put on 11.5p to 630p. Dresdner Kleinwort Benson downgraded this year's profit estimate by pounds 10m to pounds 255m but kept the shares on its buy list. Marks & Spencer lost 10.5p to 600p following SBC Warburg sell advice.

Vodafone fell 6p to 409p. Lehman Brothers edged up its profit expectations and put a 470p 12 month target on the shares.

UBS was thought to be responsible for a 7p progression to 544p by BAT Industries and rail maintenance group Jarvis advanced 12p to 353p as UBS signalled a 450p target.

Imperial Chemical Industries was little changed at 928.5p. It is selling a controlling stake in a South African explosives operation; Merrill Lynch is taking a more bullish stance, lifting its short term recommendation to buy.

Financials produced some strong gains with GRE up 12.25p to 328p and Commercial Union 31p to 886p. Norwich Union dipped 3p to 381p with Salomon Smith Barney cautious.

Three newcomers appeared. Marchpole, placed at 110p, ended at 124.5p; its debut was accompanied by a contract to supply Yves Saint Laurent casual wear to a Japanese customer. Gooch & Housego, making optical components, closed at 127.5p from a 105p placing and General Industries reached 35p from a 25p sale price.

Cordiant, the advertising and marketing group doing the splits, firmed to 110p. Shareholders get one Cordiant Communications share and one Saatchi & Saatchi share for every two Cordiant shares. Dealings start on Monday.

Phytopharm, seeking drugs from herbal remedies, flowered 7.5p to 53.5p as Nomura took a 17.1 per cent stake. The shares came from Ethical Holdings which at one time had a 28.5 per cent interest. Phytopharm was floated at 175p a share in April last year. The shares hit 210p early this year.

Drew Scientific rose 7p to 90p after the company said it could not explain the recent share weakness and trading was in line with expectations. Earlier this year the shares were above 190p.

Shield Diagnostic's encouraging progress report and continuing hopes that Abbot, the US group will take a stake, took the price 25p higher to 747.5p.

Aminex, the oil and gas group with extensive interests in the former Soviet Union, was little changed at 59.5p as Credit Suisse First Boston was revealed as the buyer of the 4.85 per cent Canadian stake which went through the market this week.

Tullow Oil enjoyed a late run, up 7.75p to 146.75p as take over hopes mingled with expectations of Bangladesh concessions but RioTinto fell 38p to 718p as slumping metal prices took their toll.