Market report: Zeneca surges in feverish trading

IN OFTEN feverish trading shares of the Zeneca drugs group surged 205p as rumours of a Continental takeover once again swirled around.

The stock market, which would dearly love a mega deal for Christmas, was happy to go along with the bid idea although speculators may have been wrong footed by institutional buying ahead of an investment presentation the drugs group has called for today.

Zeneca has been one of the market's favourite bid candidates since it was demerged from Imperial Chemical Industries five years ago.

With its impressive drugs portfolio it looks irresistible takeover fodder for the likes of Glaxo Wellcome and the Swiss giant Roche.

Although it is capitalised at nearly pounds 24bn Zeneca is a relatively small player in a rapidly consolidating industry. Glaxo, for example, is worth nearly pounds 70bn and SmithKline Beecham pounds 42bn.

Turnover, most of it during the afternoon, was 2.5 million shares. The price closed 100p higher at 2,520p which compares with a year's high of 2,762p.

Trading perked up a little from Monday's barren display and Footsie, at one time up 63.1 points, ended with a comfortable 39 gain to 5,615.7. Supporting indices edged ahead.

Blue chips drew strength from the growing conviction that the Monetary Policy Committee will feel obliged to reduce interest rates although few believe it will indulge in the full 1 percentage point cut being advocated in some quarters.

Still another gloomy retail survey appeared to underline the need for a significant, say half-a-point, easing.

British Aerospace, at one time 8p higher, continued to flutter on hopes of a Continental deal. There were suggestions it could clinch the rumoured deal with DaimlerChrysler Aerospace tomorrow. The shares ended 7p lower at 504p.

Prism Rail threatened to derail some of the other train operators after rolling out disappointing interim figures. Stagecoach, with half -year results tomorrow, shaded 11.75p to 230p. The group is expected to produce pounds 94m against pounds 73.1m; there is some vague talk it has encountered problems at its Porterbrook off-shoot. Railtrack was shunted 49p down to 1,521p by cautious comments from HSBC, which suggested the shares should be 1,350p.

British Airways was lowered 6.5p to 366.5p as it became apparent that Warburg Dillon Read had shaved its year's profits estimate by some pounds 100m to pounds 300m. Most forecasts are above pounds 400m.

Cadbury Schweppes, the confectionery and soft-drink group, fizzed ahead 30p to 913p on further consideration of its US bottling deal, and Allied Domecq, 18p to 530p, and Whitbread, 24p to 763p, responded to cheerful comments on pub trading from Scottish & Newcastle, 15.5p higher at 719.5p.

But pub tiddler Paramount collapsed 6.5p to a 10p low ahead of next week's shareholders' meeting. Five years ago the price was 105p.

The oil giants drew comfort from the modest revival of the crude price from its historic low. British Petroleum put on 23p to 883.5p and Shell, also helped by the prospect of an analysts meeting scheduled for later this month, improved 14.5p to 349.5p. But Premier Oil, seemingly doomed to relegation from the mid cap index, lost 2.25p to 18.75p.

PizzaExpress was sliced 32.5p to 812.5p by director selling. Six of its nine-strong boardroom team cashed in by selling 1.15 million shares at an average price of 837p. The deals realised a pounds 4.5m profit for the six.

Director buying gave a lift to struggling Spring Ram, the bathroom and kitchen group. The shares rose 1p to 6p after chairman Roger Regan and two other directors acquired 900,000 shares.

Arcadia, the retailing group devastated by a profits warning, fell a further 6.5p to 175p as a Warburg downgrading of its former partner, Debenhams, piled on the agony. Debenhams fell 5.5p to 330p.

The latest boardroom shenanigans at Newcastle Utd clipped the shares 3.5p to 94.5p. Blockleys, the building materials group, softened 3.5p to 41.5p. It said it was looking to unlock shareholder value. The company urged shareholders not to accept the bid from Natural Building Materials, which already has 10.5 per cent of the capital and is striving to take its support to 29.9 per cent. It expects acceptances representing a further 20 per cent.

Hewetson, another building materials group, firmed 6p to 150p - after the market closed it reported a possible bid approach. Engineer Jones & Shipman, another to attract bid interest, gained 1.5p to 12p. Mining group Waverley hardened to 6.5p after bidder Corporate Resolve revised its offer.

Arm, the computer chip group, jumped 105p to 1,195p on expected trading links and Acorn, with an Arm stake, rose 4.5p to 79p. Allowing for tax influences it seems the Arm interest could be worth 100p for each Acorn share.

SEAQ VOLUME: 854.8m

SEAQ TRADES: 55,349

GILT INDEX: 114.34 +0.45