Market Report: NatWest keeps investors guessing as BAe leads blue chips higher

Blue chips enjoyed their best session for more than two months with Footsie surging 73.5 points to 4,976.4. British Aerospace led the climb although it was the performance of National Westminster Bank which intrigued.

For the fifth day running NatWest was in buoyant form. The shares have risen with the stock market in the past two days but, perhaps more significantly, they moved ahead last week, blissfully ignoring a decidedly jittery atmosphere.

Yesterday they rose 24.5p to 875.5p with a deepening suspicion there could after all be truth in the story, dismissed when it first surfaced, of a deal with the German Commerzbank.

The theory is that the Germans want to buy NatWest's wounded securities arm. Such a sale would cut away one of the bank's problems and would be good for the shares.

Another yarn is that NatWest is on the bid trail, presumably taking the view it is better to grow from weakness than consolidate.

Commercial Union, the insurance group riding at a 762p peak with a 10.5p gain, was the chosen victim.

BAe, up 82p to a 1,651.5p peak, was propelled by a determined Merill Lynch push and a 46-aircraft order for its Airbus Industrie associate.

The Footsie display, helped by US buying and a strong New York opening, also drew impetus from positioning ahead of Friday's Footsie expiry.

The power generators, bright recently, missed the fun. They were ruffled by indications that their industry regulator, Professor Stephen Littlechild, intends to bear down on prices as well as cautious investment meetings. National Power declined 13.5p to 777p and PowerGen 7p to 572.5p.

Thorn, the rental group, had another dismal session with the adverse US court ruling lowering the shares a further 14p to a 137.5p low. BTG, after its run on the back of the hype over its new gearbox, fell 47.5p to 707.5p.

Lonrho, the demerger which failed to materialise, fell to its lowest for three years, off 6p to 105p.

The growing involvement with South Africa's JCI is causing unease. Lonrho is planning through a quoted South African off-shoot to buy collieries from JCI for pounds 229m.

JCI, which at one time wanted to merge with Lonrho, is likely to use the cash to buy Anglo American's 26.7 per cent interest in Tiny Rowland's former vehicle.

National Grid continued to progress on hopes its Energis off-shoot will be floated and the telecommunication group's cost-cutting link with Canada's Northern Telecom.

BOC, the chemical group, put on 17p to 1,077.5p with Nikko advocating a 1,440p target. It expects year's profits to emerge at pounds 621.5m against pounds 550.5m.

Royal Bank of Scotland hardened 4.5p to 619p; it sold its 2 per cent stake in Spanish bank Banco Espanol de Credito, making a pounds 30m profit in the process.

Newcastle Utd fell 3.5p to 120p on Sir John Hall's surprise departure; the shares were floated at 135p in April.

Polypipe, the building materials group, rose 5p to 216.5p. A clutch of investment houses said buy, including SBC Warburg.

Delyn, the property group, held at 97.5p as Compco lifted its stake to 2.33 per cent. It has said it would bid if invited to do so. Delyn is resisting an offer from the Newport property group.

Black Arrow, the office furniture group that last year enjoyed a sharp profit advance to pounds 3.6m, gained 5p to an 88.5p peak.The company is looked upon as a likely take-over target.

Alumasc, the engineering group known for its beer barrels, put on 22.5p to 255p following a ninth consecutive profits advance; it produced pounds 14.8m against pounds 14.1m. BZW expects pounds 16.4m this year.

Proudfoot, the management consultant, put on 2p to 27p. Four years ago the shares topped 120p. The company suffered a pounds 33.2m deficit last year, largely due to a book loss on the sale of its US millstone, Philip Crosby Associates. Interim figures are due later this month.

There are signs it should produce a reasonable half-time result indicating, perhaps, pounds 6m for the year.