Dealers make hay as inflation slides

NEWS that UK inflation fell last month to its lowest level for more than 40 years allayed fears that the next move in domestic interest rates will be up. It certainly put a spring in the FTSE 100's step as buyers appeared on hopes that there could yet be one more 1/4% reduction in the current cycle. The Footsie retrieved an initial fall of 31 points to trade 61 up before closing 52.5 higher at 5166.0.

Delighted dealers heard that the headline rate fell to 0.7% from 0.9% in December, while the underlying rate - excluding mortgage costs - edged up from 1.8% to 1.9%.

After digesting that, they were then treated to more good news, this time from across the pond. Lower-than-expected US retail sales data had many brokers forecasting a further 1/4% cut in rates on 30 January.

As Wall Street rallied in early dealings, Bear Stearns said: 'With Alan Greenspan implying no knee-jerk Fed tightening this year and, for rates to stay low, we look for a cut later this month. Greenspan holds the whip hand and this will guarantee rates will fall by a further 1/4%.'

Hedge fund manager Man Group retrieved an early 37p deficit to finish 43p better at 1300p. Chief executive Stan Fink plans to boost earnings by at least 20% annually over the next three years. Most of Man's earnings and clients are outside the UK and analysts say it is unlikely to be affected by the FSA decision to shake up the way pension plans are sold in this country.

Mobile phone group MmO2 buzzed 3p higher to 88p on hefty turnover of 76m shares. Buyers plugged in following its tie-up with Handspring, the second-largest manufacturer of hand-held computers, to launch the California-based group's wireless devices over its networks. Bear Stearns, however, has moved the stock from 'neutral' to 'unattractive'. It is worth 78.8p a share, with earnings risks going into 2002 and huge operational challenges to overcome.

Vodafone firmed 3 3/4p to 164 3/4p after selling its remaining 50% stake in a non-core German unit to Siemens for £2.3bn. Expro International, which surveys and manages oil and gas wells, soared 40p to 417 1/2p after a Morgan Stanley Dean Witter recommendation.

Amey, the support services group, rose 13p to 404 1/2p. It expects results for the year to end-December to be in line with expectations. Ashtead , however, which is in the same game, plummeted 17p to 63p after warning that full-year profits will lag last year's by a 'material amount' as US demand slows.

News of a large stake changing hands and two board appointments put Premier Direct into orbit. Shares of the company, which distributes books and novelty goods in the UK and Eire, soared 23p to 80 1/2p. Managing director Barry Moat bought ex-director Russell Stubbs' entire holding of 466,750 shares at 31.1p. It raises Moat's stake to 27%. Eric McClenaghan joins from direct sales group Betterware as sales and marketing director, while Christopher Teasdale is new operations director.

Proteome Sciences gained 7p to 44 1/2p. Intronn Inc, in which Proteome has a large holding, is using a new approach to correct the gene defect that causes cystic fibrosis. Biocompatibles fell 7p to 137 1/2p before news after hours that it has sold its Eye Care division to The Cooper Companies, a US healthcare business, for £68m. Punters were hoping for something more sexy such as a full-scale bid from Abbott Laboratories. Perhaps the disposal clears the way for Abbott to pounce.

An upbeat trading statement ahead of interims on 5 February helped SurfControl jump 72 1/2p to 610p. The leading internet filtering company in the global security market expects revenue expectations to be achieved for the second quarter and cash flow forecasts to be surpassed.

Dobbies Garden Centres sprouted a gain of 32 1/2p to 442 1/2p in a thin market after revealing sales over Christmas rose 40% compared with the previous year. Like-for-like sales rose 20%.

Fashion group Laura Ashley held at 22 3/4p, despite director Dr Khoo Kay Peng's purchase of 1m more shares at 22 3/4p increasing his stake to 9.3%.