Market Report: Market leaps with delight as Centrica bid rumours return

CENTRICA provided the market with a double delight yesterday and dealers duly rewarded it with a near 3 per cent jump.

The trading arm of the old British Gas rose 3p to 128.5p within a whisker of its all-time high as fund managers chased its forthcoming special dividend and small punters took heart from the return of bid rumours.

Income funds, keen on high-yielding stocks, were said to be active buyers of Centrica, attracted by its 12p special dividend. Traders said that the funds were keen to get a slice of the pounds 530m payout before the Tuesday deadline.

The rally was reinforced by persistent rumours that Centrica is plotting a blockbuster bid for the leaderless National Power, up 6p to 518.25p. According to the boys in the dealing room, Centrica is lining up a US partner for the takeover and the American power giants Duke Energy and Enron are the names in the frame.

The special dividend chase also boosted Unilever. The Anglo-Dutch consumer products powerhouse soared 22p to 584p as investors were lured by a 66.1p special payout, totalling some over pounds 3bn, which expires on Monday. AB Food joined in the special dividend party, rising 16.25p to 477.5p ahead of its 50p per share windfall.

Some vague talk of a bid for rival grub maker Northern Foods, up 7p at 127.5p, also did the rounds.

The rest of the blue-chips were haunted by fears of a rate hike on both side of the Atlantic and the FTSE 100 closed 50.6 down at 6356.0, the lowest level in two weeks.

The much-awaited United States employment numbers did little to dispel the fears of a tightening in US monetary policy in ten days' time and London nerves remained frayed. The undercard was also subdued, with the mid cap ending 16.2 lower at 5,861.9 and the small cap rising a mere 2.2 points to 2,578.4.

Financials reacted to a heavy overnight selling of their US rivals and had a torrid time. The persistent weakness in bond markets was also a factor. Royal Bank of Scotland shed 75p to 1,323p, while its mooted merger partner Barclays was 72p lower at 1,817p. Lloyds TSB was sandwiched between the two rumoured lovers, finishing 45.5p down at 911p.

The insurer Royal & Sun was hit by a raft of downgrades and gave up 17p to 503.5p despite talk that it could be targeted by an overseas predator. Rival CGU fell 36p to 886p in sympathy ahead of next week's results. The tank maker GKN was shot down by an HSBC negative note and closed 34p to 1,040.5.

Whitbread bucked the trend and soared 22p to 1102p amid talk that it will unveil details of its takeover of the Allied Domecq pubs. Allied firmed 10.5p to 541p.

Sainsbury was 7.75p better a t 428.5p. Speculation of a sale of the family stake to facilitate a merger with Marks & Spencer, down 1p at 414.75p, refuses to go away.

The undercard was enlivened by bid rumours. Albert Fisher, the beleaguered food producer, digested a 2.75p rise to 12p amid whispers that it is attracting the attention of a couple of US rivals. Independent Insurance was the best midcapper of the day, rising 24.5p to 295p.

A major broker was believed to have prepared a bullish note but the racier dealers preferred to believe stories of a strike by a overseas predator. A European acquisition is also a possibility. The airport group TBI flew 8p higher at 99.75p.

A bid or a stake change was still mooted but a disposal of a the commercial property side was also mentioned.

The cement maker Rugby built a 5p advance to 132p on vague talk of a takeover. Rivals RMC, down 10p to 900p, Blue Circle, down 3.5p to 439p and CRH, down 25 to 1,220p were seen as possible bidders.

The engineer TT Group was 14p up to 208.5p on stock shortage and whispers of a bid, while the support service company AEA Technology put on 17.5p to 337.5p after a stock overhang was cleared. The condom-maker London International firmed 1p to 180.5p as dealers talked of a 230p-per-share bid by the US group Safeskin could trump its merger with Seton Scholl, down 5p to 810p. Jarvis Hotels' 4.5p fall to 140.5p came despite claims that a European rival is looking at a 200-220p per share bid.

The computer services group MSB logged on a 24p rise to 251.5p amid claims that a 340p-per-share hostile bid is around the corner. The pub group Tom Hoskins frothed 7 higher to 32p as a reverse takeover by a smaller group loomed. The courier group Nightfreight delivered a 1p rise to 37.5p after revealing that the pizza entrepreneur Luke Johnson has a 7.8 per cent stake. Tradepoint, the electronic exchange, returned to the market after a suspension with an astonishing 123.5p rise to 186p. Investors are cock-a-hoop at its refinancing agreement with blue-chip banks and Reuters. The party was somewhat spoiled by whispers that the Stock Exchange has had a look at a big jump in Tradepoint shares before the suspension. Apparently the authorities found nothing untoward happened.

The mini-computer maker Psion fell 60p to 827.5p after a bearish annual statement. First Leisure shed 12p to 243.5p after saying that it wants to spin-off its nightclubs. A bearish trading update also did some damage and dragged rival Rank 10p lower at 242p.

VOLUME: 1.17 billion

SEAQ TRADES: 80,946

GILTS: N/A

LYNX MIGHT have caught the eye of a European rival. Shares in the software group were unchanged at 168.5p yesterday but insiders believe that a German-based company, possibly the computer company SAP, is preparing a bid. Developments could be announced with Lynx's interims, due on Wednesday. Lynx is capitalised at over pounds 180m and last year posted a profit of some pounds 13m on sales of nearly pounds 181m.

EURODIS ELECTRON could soon fall into US hands. The electronics parts distributor rose 7.5p to 68.5p yesterday after announcing that the American giant Pioneer-Standard bought a 13 per cent stake. Dealers believe that Pioneer, the US's third largest electronics distributor, could use the stake as a launch pad for a bid north of 90p per share. Eurodis's shares topped 185p only 12 months ago.