Market Report: Dealers cash in as Lloyds and M&S light up screens

TWO OF the market giants, Lloyds TSB and Marks & Spencer, set trading alight yesterday amid talk of huge deals. Lloyds TSB cashed in on a good rise on whispers that it is looking at a big acquisition.

Several dealers laughed all the way to the bank after Lloyds put on 14.5p to 739.5p in fairly hefty volume of nearly 24 million shares.

The word in the Square Mile is that the high street lender has digested the acquisition of fund manager Scottish Widows and is ready for another large strike.

Well-connected traders are telling fund managers and fellow dealers to put part of their bulging end-of-year bonuses into Lloyds because something might break in the next few months.

Recent whispers have suggested that Lloyds might have looked at Abbey National, 37p lower to 939p, but fresher gossip points to different targets. Some experts believe that Lloyds' chief executive Peter Ellwood could spend the company's cash pile on a US financial group, probably a fund manager or a rival bank.

But a British purchase cannot be discounted, and the names of insurers Legal & General, 1.5p higher to 171p, Norwich Union, 16.75p better to 465.5p or even Royal & SunAlliance, down 1p to 363p, were mentioned.

Lloyds' strength was all the more remarkable because the rest of the sector was in the doldrums. Rumours of an imminent bearish note on the sector and talk of bad figures from US rivals offset the Bank of England's decision to keep interest rates on hold. Woolwich, 16.25p lower to 329p, Barclays, 2p down to 1,617p, and Bank of Scotland, 26p down to 680p, were the worst hit. Hong Kong bank Standard Chartered bucked the trend with a 82p rise to 978.5p on vague talk of a Far Eastern acquisition

The other big rumour of the day focused on Marks & Spencer. The struggling retailer put on 15p to 263.5p in gigantic volume of 30 million as talk of a bid grew louder and louder. Several punters piled in after hearing that an offer of 400p to 450p could be on its way. The names of the mooted predators were no surprise: Tesco, 1.5p higher to 182.5p in heavy turnover; Kingfisher, down 6.5p to 602p; and Archie Norman's Knutsford, down 3.5p to 249p. Whispers that the appointment of the new M&S chairman is near were also heard.

The overall market broke its three-day losing spell as the Bank of England's decision and a strong start in the Dow offered some pre-Christmas cheer. The FTSE 100 finished 61.4 points higher at 6,680.8 as telecoms and oils returned to the fore.

Cable & Wireless continued to power ahead, rising 70p to a record 1,044.5p. The stories of a foreign takeover and a sale of C&W's stake in Hong Kong Telecom to Hutchison Whampoa were stronger than ever. Some dealers said that Hutchison could offer 1,200p per share and buy the whole group.

BT surged 56p to 1,414.5p amid late rumours of an Internet tie-up or a US deal. Energis, 218p higher to 2,787p, and COLT, 141p better at 2,849p after unveiling a pounds 700m share placing, were boosted by the usual bid whispers.

Vodafone AirTouch firmed 2p to 314p amid speculation that it might bid for Telecom Italia if it fails to win Mannesmann.

Away from the telecoms frenzy, publisher Reed International soared 59.75p to 443p despite another profit warning because it said that it would spend pounds 150m to pounds 200m on the Net. Vague bid whispers were also heard.

Broadcaster BSkyB gained 63p to a record 938.5p after buying a 10 per cent stake in Web games group gameplay.com, up 135p to 398.5p.

Oil stocks were buoyed by a spike in the crude price and bullish comments from the United Arab Emirates, a leading oil producer. BP Amoco flared 21p higher to 635.5p, while Shell firmed 21p to 466.5p.

The FTSE 250 continued its downward journey, falling 19.5 points to 6,227.1 due to weakness in water and retail stocks.

Bad results and dividend cuts from Welsh utility Hyder, 44.5p lower to 308p, and South West Water owner Pennon, down 240p to 497p, and a sector downgrade from Merrill Lynch sent rival groups down the drain. Kelda lost 36p to 277p, Thames Water flushed 77p lower to 687p and Severn Trent leaked 64p to 587.5p. At these levels, takeovers are likely and Scottish & Southern Energy, 9.5p higher to 488p, is said to be on the prowl.

Clothes retailer Arcadia plummeted 16.25p to 64p after broker Morgan Stanley slashed its price target from 80p to 55p. Unconfirmed rumours of financial troubles were also heard. Rival Storehouse fell 5.25p to 41.75p on whispers of bad trading, while Selfridges rose 4p to 230.5p despite the sale of near 2 per cent stake. Some dealers said the seller could have been British Land, up 2.5p to 422.5p.

WH Smith jumped 32p to 402p on talk of another Net deal, while fashion chain Next jumped 28p to 550p on talk of good pre-Christmas sales.

Vague bid talk excited chemical strugglers BTP, 8.5p higher to 309.5p and British Vita, up 6p to 230.5p. Speculation of a takeover also helped media group Aegis, 11p better to a best-ever 208p in chunky volume.

GWR was out of tune, falling 30p to 612.5p after non-executive director Sir Peter Michael sold 1.5 million shares at 635p for over pounds 9m.

The Small Cap was still in record-breaking mood, rising 9.7 to a best- ever 2,993.1 as the Net fever continued unabated. Financial news service Globalnet Financial.Com debuted on AIM with an astonishing 2,830p rise to 3,000p.

United Energy soared 5p to 20p as punters chose the next target for an Internet deal. Finance tiddler Christie jumped 70p to a record 202.5p on talk of a spin-off of its Web assets. Rival Corum gained 3p to 151.5p on whispers of an acquisition of a lender.

Airport group Wiggins firmed 0.35p to 34.25p amid talk of a purchase of a European airfield. Stephen Dean's VoyagerIT.com firmed 4.25p to 21.5p on rumours of an imminent deal. Engineer Brunel bashed 0.5p higher to 7.25p on talk of a management buyout.

SEAQ VOLUME: 1.74bn

SEAQ TRADES: 113,092

GILTS INDEX: 106.92 +0.59

f.guerrera@independent.co.uk

SPORTS INTERNET, 40p lower to 692.5p, is believed to be working to a number of juicy deals. Sports-mad dealers mutter that the company, founded by entrepreneur Chris Akers, could sign an important tie-up with a Net group.

Sports Internet owns an off-shore betting licence and the PlanetFootball website, and could provide interesting content for portals. A US group such as Yahoo! and Lycos - or even our own Freeserve - may be the perfect partner.

THE WORLD and his mother are convinced that there is a deal coming at GEI International. Shares in the maker of packaging and engineering products soared 5.75p to 21.75p yesterday on rumours that 4-per-cent shareholder Luke Johnson could broker a reverse takeover.

However, some believe Mr Johnson is not involved and that a highly-regarded management team is keen to move into GEI and transform it into a highly- rated company.