Market Report: CU leads insurance advance as bid hopes rise

Insurers are taking over as the stock market's takeover favourites. This week they have stolen a march on the banks, with Commercial Union leading the charge.

On Monday CU was 1,031p. Yesterday the shares climbed a further 39p to a 1,110p peak.

GRE, said to be talking merger with CU, put on 7p to a 447p high. The shares have risen 48.5p since Monday.

Royal & Sun Alliance rose 21p to 740p and Legal & General 16p to 718p. Sun Life & Provincial, French controlled, was little changed at 555p.

Besides deals within the insurance industry the stock market is alert to the possibility that the clearing banks, particularly Barclays and Lloyds TSB, could be tempted to strike, and there is the long-standing suspicion that Continental predators may emerge.

The merger between Royal Insurance and Sun Alliance was dictated by defensive considerations and was seen as heralding further consolidation.

Financials, in various forms, once again pushed blue chips to new highs. Although the major clearing banks tended to give ground, the two Scottish banks and the mortgage banks made headway.

Woolwich inspired the former building societies gaining 24.5p to 395.5p following its profits performance and cash handouts, and the growing conviction that it does not nurse grand and risky expansion plans. Halifax improved 21.5p to 940p and Alliance & Leicester 49.5p to 955.5p.

Bank of Scotland added 34p to 691p and Royal Bank of Scotland 35p to 987p.

Footsie, at one time up 31.8 points, suffered a little late pressure, closing 19.9 higher at a 5,723.4 peak. Supporting indices, too, were in record-breaking mode.

The sharp increase in January's retail sales reawakened fears of higher interest rates although Marian Bell, chief treasury economist at Royal Bank, said: "I would hope the doves win the day because I don't think they should be hiking rates".

Safeway fell 10p to 372p on the surprise departure of director George Charters. With the market fearing that next week's trading statement will, in fact, be another profits warning, the shares would have fallen further but for hopes of an Asda bid.

Associated British Foods held at 622p despite NatWest Securities caution, and Courtaulds, the chemical group, gained 11p to 274.5p with Dresdner Kleinwort Benson saying buy.

The fund manager Ivory & Sime edged ahead 3p to 204.5p on a Merrill Lynch upgrade and Argo Wiggins Appleton, the paper maker, enjoyed another takeover whirl and buy advice from Credit Lyonnais Laing, gaining 9p to 167.5p.

Compass, the contract caterer where takeover hopes linger, put on 31.5p to 860.5p. Ahead of the breakdown of takeover talks with SBC Warburg Dillon Read, Christie's International, the auctioneer, was up 5p to 265p.

British Aerospace, ahead of today's figures, rose 40p to 1,830p. Overseas shareholdings have reached the 29.5 per cent ceiling. It is thought to be the first time BAe has been in danger of breaking the restriction on foreign interests.

The Government is on the verge of increasing the overseas limit to 49.5 per cent, a move which would also help Rolls-Royce, up 2.5p at 206p.

Rank, the leisure group, hardened 14.5p to 333p. Figures are due on Friday.

LucasVarity, the aerospace group, gained 4p to 222p with Warburg keen on the shares. There are reports of a deal with French giant Thomson- CSF to produce technology which would allow a car to automatically match the speed of traffic ahead of it.

Jarvis, the high flying rail maintenance group, climbed 16.5p to 529p following investment meetings in Scotland.

Euro Sales Finance, providing a small companies service, jumped 82.5p to 292.5p with interim figures ahead of expectations and moves to develop in Europe. But Ronson, the luxury goods group, fell 2p to 4.5p as the hoped-for rescue bid remained elusive. Home Counties Newspapers slumped 85p to 400p as the takeover by Johnston Press went to the Monopolies & Mergers Commission.

Xenova, which has fixed up a licensing and research pact with Eli Lilly, the US giant, gained 31p to 225p.

Lionheart edged ahead 1.5p to 14.5p, highest for two years. Year's results are due next week and around pounds 1.2m is expected. The company, revamped by Mark Flatman, ex-Courtaulds Textiles, suffered a pounds 12.7m loss in 1996. Lionheart, which hit 320p four years ago, is now largely a supplier of bathroom accessories.

Capital Radio sounded a 25p gain to 615p. A buyer for 550,000 shares at 603p was responsible. The group has made an application to run a North- east radio station dedicated to children.