Market Report: Interest rate suspicions push shares higher

Weak manufacturing figures and the lengthening dole queues strengthened the view that the cost of money remains too high to encourage the still fragile economic recovery. Wednesday's poor retail figures, although thought by many to understate the level of shop sales, had already revived the clamour for lower interest rates.

Not surprisingly, banks enjoyed much of the action. Although next month's profits season will produce uneven results the clearers enjoyed their best session for a long while.

But, perhaps significantly, Lloyds Bank, expected to kick the sector even higher by indulging in takeover action, remained stuck at 499p.

Standard Chartered, currently everyone's favourite bid candidate, put on 6p to 636p; Royal Bank of Scotland 8p to 222p and Bank of Scotland 4p to 128p.

TSB Group, however, lost some of its bid enthusiasm, falling 2p to 164p.

Barclays, on hopes that the dividend will be held, rose 15p to 412p; HSBC 23p to 550p and National Westminster 11p to 426p. Abbey National gained 8.5p to 360p despite cautious comments from UBS Phillips & Drew. It expects profits to have fallen from pounds 618m to pounds 570m last year but looks for pounds 630m this year.

The rest of the market was enlivened by a significant programme trade, involving the leading banks and such blue chips as Glaxo Holdings and TI Group.

Among insurers, Commercial Union held at 616p. In a 102-page review Smith New Court wonders about a pounds 350m rights issue but suggests the shares could reach 750p in the next year. Profits last year are expected to be pounds 18m, jumping to pounds 173m this year and reaching pounds 328m next year. Other insurers moved ahead.

Cable and Wireless confidently ignored sell messages from the US investment house, Paine Webber. But Reuters felt the weight of James Capel caution, falling 24p to 1,330p.

Rights issue rumours lost their appeal. Allied-Lyons retreated a further 4p to 586p although it apparently denied cash-call stories. Glaxo Holdings put on 15p to 717p as the rumours faded of a rights to pay for overseas acquisitions.

Another rights candidate, Trafalgar House, rose 3.5p to 92p, helped by Carr Kitcat & Aitken support. Ocean Group, 15p higher at 283p, reflected an investment meeting, and Unigate, 3p better at 333p, continued to draw support from analyst meetings.

Associated British Foods fell 9p to 485p as Barclays de Zoete Wedd lowered its recommendation to hold.

Burton Group had a volatile session following its shareholders' meeting. At one time the shares were down to 67p. They closed at 71.5p, a 1.5p fall. Bass rose 13p to 593p on the better- than-expected statement, although profit forecasts were pulled back. Whitbread 'A', as SG Warburg suggested a switch into Bass, dipped 7p to 445p. Kleinwort Benson optimism lifted Grand Metropolitan 15p to 440p.

Takeover hopes influenced Kwik Save, the supermarket chain, 12p higher to 806p. The engineer APV added another 4p to 128p on continuing speculation that Siemens, the German group, will strike.

But Hanson, expected by many to produce the next big bid, rose 3p to 239p. The Danish stockbroker Bikuben Securities described the shares as a 'trading buy'.

Water shares sank as Credit Lyonnais Laing made cautious noises. Thames Water fell 7p to 472p.

The steel group GM Firth rose 4.5p to 14.5p on the arrival with 4.39 per cent of Roger Shute, formerly of BM Group. Leeds, the textile group, held at 540p as Courtaulds, the chemical group, trimmed its shareholding to 6.89 per cent by selling 100,000 shares.

Heavily indebted Brent Walker, just 4. 75p at the start of the year, continued what has become a fascinating performance. The shares achieved another 1.5p gain to 13p. The relaxation of betting shop hours has helped. And there are indications that its pub estate is turning out to be one of the main beneficiaries of the shake-up created by the Government's unpopular Beer Orders. But it could be that the shares are being squeezed higher as positions are covered.

Shoprite, an Isle of Man food retailer, jumped 65p to 733p. It is raising pounds 9.8m for expansion by offering shares at 645p through CLL.

Shares moved ahead strongly yesterday in busy trading. The FT-SE 100 index finished near its best level of the day - up 24.6 points to 2,773.3. The FT- SE 250 index was 9.3 higher at 2,899.2. Trading volume topped 700 million shares, with 30,508 bargains recorded. Government stocks were firm

Prime People, a management training group, nearly halved to 2.5p following the departure of the chairman Alan Greenough and a warning profits would be below expectations. Peter Hearn, whose interests have around 10 per cent, takes over. Last year in a pounds 2.7m deal PP took over Bowford Engineering, a training group. It is Bowford's performance that forced the warning.

BAA, the airports group running Heathrow and Gatwick, is attracting investment support. The stockbroker Greig Middleton has added its voice to the chorus of buy recommendations. Its forecast, not quite as bullish as its rival Panmure Gordon, suggests profits of pounds 275m this year and pounds 310m next. PG expects pounds 284m and pounds 324m. The shares rose 5p to 788p yesterday.