ANOTHER sudden burst of takeover speculation involving a FTSE 100 constituent this time Thorn EMI was just the excuse the stock market was looking for to give leading share prices a much-needed lift yesterday.
The latest bout of intense bid rumours accompanied a good rally in gilts and left the FTSE 100 index comfortably clear of the 3,700 level at 3,728.5, up 10.1 on the day.
The market's second liners, represented by the FTSE Mid 250 index, gave another powerful demonstration of the underlying strength of the domestic stocks, advancing rapidly all day and ending 21.8 better at another all-time high of 4,348.7. The Mid 250 index has consistently outpaced Footsie so far this year, as has the Small Cap index.
London's performance was all the more impressive in that Wall Street was looking soggy shortly after US markets opened, with the Dow Jones Industrial Average showing a double-digit fall after an early rise of around 15 points.
Thorn EMI shares suddenly erupted in the early afternoon, with domestic and US buyers driving the stock up to an all-time high of £18.43 sterling, amid strong rumours that a straight takeover bid was being prepared ahead of the proposed July demerger of the music business.
The market trotted out all the usual suspects as potential bidders for Thorn, including Japan's Sony and Time Warner of the US; another candidate thought likely to be strongly interested in EMI was MCA, the Seagram subsidiary.
Wall Street's overnight surge, which saw the Dow up over 50 points shortly before the close in the wake of a series of mega-mergers and bids, helped Footsie open almost 15 points higher.
The initial burst of enthusiasm soon petered out however, and the index slipped into negative ground in mid-morning, with Cable & Wire less and BT, the two stocks that have been the driving forces in London in recent sessions, among the worst performers.
This was in the wake of news that France Telecom and Deutsche Telekom had indicated they were not interested in bidding for Mercury, C&W's British telecoms division. The retreat in C&W and BT was worth just under four Footsie points.
Good gains in international bond markets, which led to gilts regaining all their initial small losses and posting eventual closing gains of between 9 and 14 ticks, then began to have an impact on equities.
Dealers said it was the Thorn story that had transformed sentiment. "Ex-Thorn the market was struggling and without a bid, it is definitely winding down for the Easter break," said one senior marketmaker.
He added that most of the big marketmakers in London were wary of adopting big stock positions ahead of Good Friday, when London is closed while the US non-farm payroll number for March is published. February's exceptionally strong employment report sent Wall Street tumbling.
Turnover at 6 p.m. reached 920.9 million shares with non-Footsie stocks accounting for 60 per cent of the total. Customer business on Monday was a disappointing £1.14 billion.
