Market Report: Speculators marry off Asda and Argyll on a dull day

A rumoured superstores merger captured the imagination of the more alert speculators as, on a dull day, the inevitable intriguing story hovered a little below the surface just waiting to be discovered.

The talk was that Asda and Argyll Group were thinking of linking to create the nation's super retailing chain, outstripping the current front-runners, J Sainsbury and Tesco.

Asda, up 1p at 119p, lingered just below its recent peak; Argyll, the Safeway chain, rose 2p to 346.5p, within hailing distance of its 12-month high.

The theory is that Archie Norman, after rescuing Asda, needs a new challenge. Argyll with management changes imminent, could do with an injection of Mr Norman's enthusiasm. The two groups would represent a snug fit with little overlap to taunt the monopoly tendencies of Whitehall. It was the sort of day when stock market imagination often runs riot and the Asda/Argyle story may be no exception. But there is no doubt something stronger than a sneaking suspicion exists that Mr Norman, after his Asda success, has a significant corporate deal up his sleeve.

Of all the supermarket chains Asda and Argyll have a related approach and could find merging a relatively painless exercise.

The rest of the market was in dismal retreat with the FT-SE 100 index off 29 points at 3,746.7. The closeness of the Israeli election, new problems for President Clinton and the feeling US interest rate will move higher combined to undermine sentiment.

The weakness of government stocks is becoming an increasingly serious contribution to the malaise afflicting equities. Yesterday's three point decline piled on the agony. British Gas had another day of recovery, climbing 5p to 189.5p. SBC Warburg was behind the latest advance. The securities house decided to ignore the current climate and put Gas back on its buy list. It takes the view the pipeline company could be worth 216p and the rump somewhere between 24p and 62p.

Other utilities took a breather after this week's heady excitement and even Southern Water seemed too tired to respond to suggestions ScottishPower would return with a higher offer, falling 5p to 982p.

Ladbroke, the betting and hotel group, was again busily traded with volume put at 19.5 million. The shares shaded 1p to 190p. The heavy trading, if not the share price, indicates corporate action. A deal with the US Hilton Hotels Corporation or a take over from Bass remain the market's favoured options.

Unilever, the Anglo-Dutch group, was ruffled by the threat of another round of price cutting from Procter & Gamble, the US giant. The shares fell 15p to 1,211p.

Albright & Wilson, the chemical group, edged forward 3p to 183p on a US analysts' visit and Camas the building materials group, moved 1.5p to 86.5p on analyst meetings.

Hanson slipped 2.5p to 189p. ABN Amro Hoare Govett has put a 213p valuation on the soon-to-be-demerged group. Tomkins, the buns to guns conglomerate, forecast better-than-expected profits and dividends and lifted the shares 9p to 256p.

Inchcape, the international trading group, gained 5p to 296p; NatWest Securities described the shares as "cheap". Vendome fell 18p to 627p as the expected bid from Richemont failed to materialise.

Amey, the construction group, bounded 17p to 293p; Schroders investment arm has acquired 9.5 per cent. The shares have recently been galvanised by a British Rail maintenance contract.

Newcomer Whitecross, the market's first dentist, traded at 95p against an 84p placing level. Recognition Systems, a computer group placed at 70p, gained a further 11p to 121p.

World Fluids, which has said it is near to completing a substantial acquisition, rose 0.5p to 5.25p and bid speculation lifted Chesterton International, the property consultant, 10p to 120p; Barbour Index, a specialist information group, gained 30p to 425p with vague talk of bid activity in the air.

The sharp little scrap over Brightstone Properties ended with bidder Clarke Nickolls & Combs, a former sweet maker, winning acceptance with an increased offer of pounds 9.22m. Agreement means a proposed Brightstone link with ubiquitous entrepreneur Luke Johnson had been abandoned.

Highbury House Communications, the former Harrison Kilbride, continued its recent intriguing run, gaining 1.5p to 22p. The publisher was rescued last year through a cash call.