MARKET REPORT Trading mood taken over by takeovers

Shares continued to move ahead, with old-fashioned takeover speculation again the most powerful influence.

With a modest relaxation of interest rate tension helping sentiment, the FT-SE 100 index jumped 25.1 points to clamber above the still-psychologically important 3,000 level.

For once London was indifferent to an unimpressive New York display as speculators again bayed for takeover blood.

They were not disappointed by the steady flow of developments. Glaxo followed up its near-£9bn bid for Wellcome with a $485m US acquisition, British Aerospace agreed the French/Italian regional jets deal, Cadbury Schweppes made a $1.7bn offer for Dr. Pepper/Seven-up and Cable and Wireless linked with Veba, the German utility group.

Dresdner, the German bank, managed to cool the banking excitement by saying it was not involved in talks with the current crop of takeover favourites, such as Kleinwort Benson, TSB and SG Warburg.

TSB closed at 242p, off 6p. At one time the shares were down to 238p. Turnover was again heavy, with Seaq putting volume at 8.5 million.

Kleinwort, earlier 33p higher at 632p, finished just 2p better at 601p; Warburg fell 7p to 747p after touching 784p.

Much of the takeover speculation switched to insurances, a sector largely ignored in the recent excitement. With the industry facing extremely tough trading conditions, highlighted by the various cut-price offers being waved around, there has been littleinclination to buy on trading grounds.

But suddenly, stories of Continental bids resurfaced with, as is now customary, the French and Germans seen as the most likely predators. The market's revival, three days of gains, also helped sentiment.

Among composites Commercial Union gained 20p to 506p, Royal Insurance 9p to 262p and Sun Alliance 11p to 300p. On the life pitch Legal & General put on 10p to 425p and even Prudential showed signs of recovering from Mick Newmarch's departure, gaining 4.5

p to 296p.

Other financials to take up the bid baton were Schroders and Smith New Court. Schroders' voting shares rose 45p to 1,440p, with the non-voters also up 45p, at 1,298p. Smith gained 9p to 449p.

Barclays improved 5p to 305p as Lehman Brothers moved its recommendation from hold to buy.

Inchcape, the international trader, was the day's main casualty, reversing 82p to 311p following a profit warning.

Glaxo rose 16p to 616p and Wellcome, on its rejection, gained 32p to 986p; Cadbury jumped 23.5p to 422p on its Dr Pepper move and BAe was little changed at 473p.

Cable and Wireless ended unchanged at 378p after touching 404p as Veba picked up its 5 per cent stake at 395p.

Imperial Chemical Industries improved 12p to 753p, encouraged by the results from Dow, the US group.

British Airways climbed 8.5p to 367.5p ahead of today's figures from USAir, its struggling associate. The results will again be disastrous but hopes are high that it has hammered out a restructuring that has won the support of its trade unions. A reshaped USAir could save BA from the embarrassment of a big US write-off.

Electricities were dull. Swiss Bank Corporation has increased its stake in Trafalgar House's bid target, Northern Electric, to 5.06 per cent The shares, it says, are for market-making purposes.

First Choice, the holiday group where PDFM has 19 per cent, fell 2p to 118p; Airtours rose 5p to 431p following an upbeat trading statement.

Manchester Utd reacted to the Eric Cantona fracas with a 5p fall to 126p. There was a clutch of deals at 124p.

Enterprise Computers' heady run came to an end when the company said it was still talking to its bankers and hoped to say more next month. The shares fell 1.5p to 3p.

RAP, an industrial distributor, put on another 5p to 151p following its meetings with analysts.

Tadpole Technology remained weak, down 13p at 187p. London & Manchester (Portfolio Management) has acquired 475,000 shares, taking its stake to 7.61 per cent.

Goode Durrant, the transport group, which was down to 125p last year, held at 212p. It has become apparent the revitalised group has lost its appeal to one of its longstanding unit trust supporters. Aberforth UK Small Companies Fund held more than 1 million shares in June; its latest review shows its holding down to 212,000.

Toad, one of the Henry Cooke Lumsden entries on the backwater and often risky 4.2 share market, has won a £125,000 order for its lorry immobiliser. The contract represents more than the vehicle security group's turnover in its last reported six months. The shares are still around the 85p December flotation price. One of Toad's backers is Chris Evans of Chiroscience.

Shares of Bellwinch, normally a quiet market, have attracted attention this week. There are hopes the housebuilder will have encouraging news when it reports interim figures next month. Some expect it to comfortably exceed the £544,000 produced last yearand to pay an interim dividend. About £1.7m seems likely for the full year. The shares held at 33p.