Market Report: Siebe deal starts a blue-chip charge

BEDRAGGLED engineers, for long the poor relations of the stock market, shrugged off their worries as the surprise pounds 9.4bn BTR deal with rival Siebe awakened thoughts of bid activity in the industry.

Shares of BTR, weak recently as bearish stories filtered across the Atlantic after an analysts' visit to its US operations, surged 38p to 133p in often frenzied trading. Siebe, which appeared to delay its interim results until yesterday, jumped 28p to 243p in heavy but less frantic dealing. According to Seaq, turnover in the two engineers was more than 100 million shares.

The stock market took some time to warm to the BTR deal. But American investors clearly liked the merger and were largely responsible for powering the two engineers so much higher.

With Footsie's two engineers merging at a time of weakness, almost every other engineer in sight discovered new strength.

Cookson rose 9.5p to 125.5p; Senior Engineering 5.5p to 122,5p and Powell Duffryn 18.5p to 427.5p. Others helped along included BICC, up 7p to 69p, and Electrocomponents, 31p to 420p. Williams gained 36.5p to 395p.

The engineering excitement, plus more speculative activity in the insurance group GRE, helped Footsie to record its third century in succession, probably its best-ever run. The index rose 130.9 points to 5,848.4, its highest level since early August. Lower interest rate hopes and another strong New York display also contributed to Footsie's strength.

The blue chip charge spilt over to the mid cap index and to a much lesser extent the small cap, both of which are heavily stocked with engineering shares. The mid cap rose 58.2 to 4,901.2 and the small cap 6.7 to 2,060.4.

GRE's admission it was looking for a suitor lifted the shares 42.5p to 350.5p; they were 475p earlier this year.

EMI, the other Footsie takeover candidate, was less rewarding, spinning 27p lower to 365p as bid fever subsided after News Corporation, Bertelsmann and EMI dismissed speculation of takeover action.

In a late flurry on Friday, EMI was heavily traded with prices of more than 400p paid by speculators who were convinced corporate activity was imminent.

The GRE excitement served to underline the conviction that the main thrust of future bid activity will be among financials. CGU put on 76p to 1,018p and Barclays 79p to 1,399p.

Elsewhere, the out-of-favour brewer Bass enjoyed "strong buy" advice from Morgan Stanley, gaining 57.5p to 805p and the P&O shipping group continued to benefit from the better-than-expected P&O Nedlloyd Container Line third-quarter figures, rising 42p to 740p.

Racal Electronics experienced a late spurt, up 21p to 325p, prompting talk of impending corporate activity. The computer group FI added 13.5p to 265p, with HSBC making positive noises.

Booker, the cash and carry chain, was the worst performing mid cap constituent, falling 4.5p to 65.5p as worries about trading deepened. Weir, the engineer, eased 3p to 198p after a cautious trading update.

Smaller oil companies remained depressed by the weak crude price. Enterprise Oil fell 10p to 360p and Lasmo softened to 152p. But the giants, British Petroleum and Shell, headed higher. BP put on 15.5p to 944.5p despite "reduce" comments from Goldman Sachs; Shell improved 6.25p to 365p.

Storehouse gained 6p to 141.5p in heavy trading. It appears ABN Amro has begun to unwind its disastrous 5 per cent shareholding acquired two months ago. The investment house picked up some 22 million shares at 214.5, hoping to sell them on to a client. But the deal collapsed. It is estimated ABN is nursing an pounds 18m loss.

Thistle Hotels firmed to 120.5p, despite a pounds 5m forecast cut by BT Alex.Brown. It is now looking for pounds 86m this year against the pounds 80.6m achieved last year.

Tomkins put on 9p to 271p, throwing off caution from Henderson Crosthwaite, which lowered some of its profit estimates. The investment house was more kind to Tate & Lyle, pointing to recovery prospects and lifting the shares 8p to 388.5p.

Arriva, up 10.5p to 396p, reflected hopes of the sale soon of its leasing side, and Autologic, the transport group, jumped 32.5p to 182.5p after picking up five new corporate customers, including Jaguar and Avis.

Xavier Computer jumped 3.5p to 14p after reporting bid talks. Profit warnings also circulated with Servomex, an electronics group, off 58.5p to 99p and Boosey & Hawkes, the music group, 87.5p to 337.5p.

BWI, an engineer, tumbled 12.5p to 43p. It said there had been "no material change" since its July statement when it expected "satisfactory" half- year figures.

SEAQ VOLUME: 844 million

SEAQ TRADES: 82,445

GILT INDEX: 112.47 +0.07

DESIRE PETROLEUM, riding at 445p in the summer, was little changed at 22p as its Falkland Islands adventure suffered another blow. With completed drills disappointing, it said it expected a lull in its Falkland activities and may consider looking for developments elsewhere. Desire, together with Westmount, 2p down at 22.5p, and Greenwich Resources, 0.5p to 11.75p, were briefly known as the Falkland flyers as rumours of oil strikes swirled.

REUNION, the mining group, gained 8p to 36p after encouraging comments on its Skorpion zinc project in Namibia, which, it is claimed, could become one of the world's largest and lowest-cost zinc mines with at least a 14-year life. It could be worth 234p a Reunion share. Since coming to market three years ago the shares have been as high as 138p but were recently bumping along at around 27.5p.