Market report: Thursday close

BANK shares were powering ahead again today, fuelled by further takeover speculation.

Speculators say that Barclays' chief executive Matt Barrett steps down next year and may choose to go out with a bang. It doesn't matter if you don't believe the tale - most traders don't. But they are grateful that stories like this are helping to keep the market bubbling away.

Hefty turnover was also being seen in Lloyds TSB, up 10p at 437p, where more than 34m shares were traded. HSBC rose 19 1/2p to 829p on turnover of more than 24m.

A forecast of profits at the top end of expectations and positive comments on current trading from Northern Rock cheered the City and lifted the price 12p to 705p. The mortgage lender forecasts a slowdown in house price rises but says trading conditions remain buoyant - re-mortgaging accounts for half of new business. Broker HSBC was quick off the mark and upgraded its recommendation on Northern Rock from add to buy while rival Teather & Greenwood repeated its buy advice.

Shares generally moved to extend yesterday's gains, which broke an eight-day run of falls. The FTSE 100 added 39.9 points to 4209.1.

BP retreated 1 1/2p to 420 1/2p following its trading update showing increased pressure on gas margins. BG Group was steady at 260 1/2p.

Brokers reported further heavy turnover in Royal & SunAlliance. More than 107m shares changed hands during the session, most of them in the first hour of business. Initially the price firmed 4 1/2p to 91p before falling 2 1/2p to 84p later. That compares with the 70p rights-issue price. The nil-paid slipped 1 3/4p to 15 1/2p.

Old Mutual rose 1p to 95 3/4p after US securities house Smith Barney moved it from hold to buy in a review of the South African life insurance sector. Smith Barney recently met Old Mutual's life management in Cape Town, which has led it to reduce new-business forecasts while leaving earnings forecasts unchanged.

Housebuilders were a firm market. Taylor Woodrow, which recently launched a bid for rival Wilson Connolly, has been talking to brokers. They say the group is upbeat about prospects which may account for the rise of 13 1/2p in its shares to 246 1/2p. This spilled over into the rest of the sector, with Barratt Developments up 15p to 514p, Persimmon 10p to 540p and Westbury 7 1/2p to 407p. The speculators are looking for further consolidation within the sector.

Brewer SABMiller shaded 1p to 473 3/4p as investors continued to reflect on Monday's positive trading update. Broker UBS has repeated its buy recommendation and raised its 12-month target price from 525p to 545p.

UBS is also taking a more upbeat view of biotechnology specialist Acambis, 5 1/2p firmer at 307p.

It has raised its recommendation from reduce to neutral but lowered its target price from 320p to 300p after recent weakness in the shares.

Merrill Lynch has also raised its rating from sell to neutral.