Market report: Monday close

INVESTORS reacted to the prospect of war by driving the FTSE 100 Index sharply higher. The closing of 'diplomatic windows' removed market uncertainty surrounding Iraq and pushed the Footsie up 120.5 points at 3722.3 by the close.

The blue-chip index was also given a boost by an early surge on Wall Street after an announcement that US president that George W. Bush was to address the nation in a television broadcast.

London shares have added more than 13% in value since Wednesday night - a rise of 435 points in those three sessions.

In the oil sector, a two-way pull developed, with stock market bulls and bears locked in a fierce struggle to gain the upper hand. Weekend reports said war with Iraq would result in the oil price being driven sharply higher on world markets. Some estimates claim the price of Brent crude could reach $50 a barrel as production is affected. That would damage Britain's industrial companies by driving up costs.

Other sources say the war premium currently contained in the oil price is already far too high and that, once hostilities begin, it will come under fresh selling pressure that will drive it back down to about $20 a barrel. BP touched 388 1/4p before rallying to trade up 14 3/4p at 415p. Shell rose 13p to 376p after touching 355p.

Oil industry services specialist Wood Group was up 5 1/2p to 154 1/2p after broker Merrill Lynch raised the shares to a buy and set a target price of 185p. The group cheered the market last week with a robust profits performance.

Among retailers, there was no sign of the expected dawn raid on bid target Safeway by the richest of its suitors, US retailer Wal-Mart.

Safeway stood out with a rise of 7 1/2p to 291p on turnover of almost seven million shares. Weekend reports claimed Wal-Mart had approached institutional holders of Safeway stock with an offer for their shares.

The Office of Fair Trading has completed its report on the various proposed bids for Safeway and has made known its findings to the Government.

Original suitor Wm Morrison, up 1p to 167 3/4p, says it is pressing ahead with its near-£3bn all-share offer despite its share price having fallen almost 20% since the offer was made in January.

Smith & Nephew rose 16 1/4p to 386 1/4p, backed up by reassuring trading news from rival Zimmer Inc in the US. Broker UBS Warburg has repeated its buy recommendation on the shares and raised its target price from 400p to 436p.

Debt-laden telecom equipment supplier Marconi fell 0.10p to 2.20p ahead of the proposed restructuring that is likely to result in existing shareholders walking away with next to nothing. Marconi's financial advisers, on the other hand, have already slapped in invoices totalling £75m for their part in restructuring the group.

Steelmaker Corus rallied a further 2 1/2p to 8p in heavy turnover of more than 115 million shares. US investment bank JP Morgan says Corus is a high-risk play but reckons the break-up value is 15p. It is sticking with its overweight rating.

Canary Wharf rallied off its low with a rise of 5 3/4p to 165 1/4p. Despite this, Deutsche Bank has downgraded the property developer from buy to hold following disappointing interim results. It has also slashed its target price from 360p to 160p.

Granada retreated 1 3/4p to 55p. Institutional shareholders have been raising objections to chief executive Charles Allen's contract.

AIM-listed CRC added 1p to 153 1/2p. Michael Peagram is retiring as chairman. David Ryan, who was executive until May last year, returns as chairman.

Prices and indices in this section are supplied from various sources and calculated at different times and may not always match those listed in the tables. Ofex prices relate to the previous close.