Shares: Market Report: Double insurance strike rumours send shares soaring

Insurance shares mesmerised the stock market. Rumours swirled that an overseas group planned to barge into the comfy pounds 15bn merger arranged between Commercial Union and General Accident.

CU shot ahead 62p to 1,120p; GenAcc jumped 57p to 1,380p.

The rumour - astonishing even by the often outrageous standards of the market - suggested that a predator was about to block the merger by pouncing on the two insurance groups.

Idea, it was said, was the creation of the world's biggest insurance group. A theory supporting the take over yarn was that CU had rushed into the arms of GenAcc in order to avoid a hostile overseas strike. Now the thwarted predator was preparing its revenge with a double cash bid which would have to be in the region of pounds 16bn.

Possible bidders with such a hoard of ammunition are few and far between. A couple of insurers and, of course, a clutch of banks.

There has for long been talk of a major clearing or mortgage bank descending on an insurance group. Such a strike would make sense for, say, Barclays or Lloyds TSB.

But it was the rumours of an overseas assault which caused the excitement. Although two giant mergers - Glaxo Wellcome and SmithKline Beecham and Reed Elsevier and Wolters Kluwer have crashed - the market remains on bid alert, convinced the round of big corporate adventures is far from over.

Regulators are getting more and more inquisitive but Diageo, which has emerged as the world's biggest spirits group without enduring too much hardship, is put forward as an example of official tolerance.

With corporate advisers earning fat fees from the urge to merge, the City is in no mood to allow this particular gravy train to be shunted into the sidings.

The CU/GenAcc story brushed other insurers with GRE up 22p to 458p; Royal Sun Alliance 27p to 808p and Prudential Corporation 20p to 934p. London & Manchester put on 10p to 566p.

The financial sector made a major contribution to Footsie's push to a new peak. Schroders, ahead of results, gained 95p to 2,395p. The figures are expected to be impressive but in these bid happy days there is a feeling they may be accompanied by some form of corporate action, such as a deal with Morgan Stanley. Halifax, on its Birmingham Midshires guzumping, firmed 17p to 942p. Positive noises from HSBC Securities helped the banking sector.

Footsie ended 9.6 points higher at 5,828.5p. The mid and small cap indices also achieved record highs.

Williams, which announced the sale of the Nu-Tone building materials business with its results, gained 22p to 410p but BTR, strong with Williams on Monday, fell 16.75p to 193.25p.

Dixons, due to be removed today from Footsie, fell 22p to 490p. Finance director Robert Schrager denied a profits warning was planned. Kingfisher rose 33p to 1,030p with SG Securities suggesting the shares would reach 1,100p.

Carlton Communications added 17.75p to 454.75p with Panmure Gordon producing a 560p target; Schroders suggested Reed International was heading for 570p - the shares fell 12p to 608p.

Take over speculation continued to haunt Zeneca, up 48p to 2,743p, and Reckitt & Colman, results tomorrow, hardened 32p to 1,091p.

BPB, the building materials group, allegedly jumped 57p to 400p. It looked like yet another order book hitch with the last order book trade going through for 9,000 shares at 400p. The last normal trade was at 348p and the final spread was 353p to 360p.

Independent Insurance, on results and director share buying, jumped 140p to 1,395p.

Carrs Milling fell 42.5p to 182.5p on a profit warning and recruitment group Prime People fell 2.5p to 10.5p on a denial of take over activity and figures below best expectations.

Oxford Instruments, the subject of a Henderson Crosthwaite investment dinner at London's Claridge's Hotel, jumped 17.5p to 325p. HC rate the shares a buy.

Queens Moat Houses, the slowly recovering hotel chain which has results soon, was heavily traded, ending 1.5p higher at 21.25p.

KS Biomedix, with a possible arthritis treatment, had another run, up 23p to 286.5p. The shares were 106p in January.

PolyDoc, the information group, was another still on the high road, improving a further 42.5p to 275p. John Lusty, the food group, hardened another 1.5p to 12.75p.

Healthcall fell 12p to 87.5p. Transworld Healthcare has dropped its 105p a share offer. HCMS, partly owned by Healthcare's management, had earlier made a 90p a share bid, pricing the company at pounds 50.1m. Healthcare's chairman, Christopher Stewart-Smith, is recommending acceptance of the HCMS offer.