Rate hopes put rocket under stocks

HOPES of an interest rate hat-trick this week lit the blue touch paper. Last week's catastrophic US data, including the worst unemployment rate for almost five years in October, confirmed that the American economy is already in recession.

The Federal Reserve, the US central bank, is therefore strongly tipped to slash US rates by a further 1/2% to 2% today to kickstart a recovery. The Fed's tenth reduction this year is expected to be followed by similar cuts in UK and euro zone rates on Thursday.

Believing the Fed's medicine will eventually work, the Dow Jones Industrial Average followed Friday's gain with a rise of 1.3%. The FTSE 100 ended 79.6 better at 5209.1.

The odds on a 1/2% cut in UK rates to 4% also shortened considerably after a survey by the Chartered Institute of Purchasing and Supply for service industries showed that activity dropped for the second successive month. Latest industrial production figures made matters worse, showing output falling by a worse-than-expected 3% in September.

Interest rate-sensitive stocks led the charge, with banking group Barclays ahead 84p at 2175p. Standard Chartered improved 22 1/2p to 733p, Alliance & Leicester 12p to 745 1/2p, HBOS 17p to 832p and Lloyds TSB 21p to 725p. Royal Bank of Scotland firmed 35p to 1718p.

Properties were also in demand, with British Land rising 21 1/2p to 481p and Land Securities 27p to 878p.

British Telecom buzzed 13p higher to 353p ahead of Thursday's second- quarter figures, the last before the demerger of mm02, its mobile phone business, on 19 November.

A Banc of America Securities price target of 60p lifted cable company TeleWest Communications 5 1/4p to 49 3/4p on turnover of 28m shares. The broker believes the business is almost fully funded, but that a refinancing should be necessary by 2004.

Buying on recovery hopes left Dimension Data 10 3/4p up at 75p. Telecom Plus, the telecoms, gas and electricity supplier with 90,000 customers, improved 3 1/2p to 92p on impressive interims.

Mecca bingo-to-Hard Rock Cafe leisure group Rank was sold down to 186p before closing 13 1/2p lower at 190 1/2p. Rumours of a pending bearish circular and imminent acquisition had some investors running for the exit.

Car dealer Quicks Group edged forward 2 1/2p to 67 1/2p after a 25% stake changed hands. Veteran property entrepreneur Jack Petchey sold 10m shares, or 25.1%, to Warren Holdings, a mystery unquoted concern. Petchey retains a near-4% holding in Quicks via Trefick, his Isle of Man investment vehicle. Rival car group Ryland held at 65 1/2p, despite Sir Ron Brierley's Guinness Peat Group (unchanged at 45p) increasing its holding to 26.3%.

Nobody took any notice of Henderson-Morley when it floated on Aim in September. Why? It came to market on the day the World Trade Centre towers were attacked. The herpes research and development specialist on Monday jumped 2 1/4p to 5p on speculative buying fuelled by talk of imminent developments regarding Exanol, its plant-based treatment for herpes.

Frozen at 1.22p last week, Butt Ugly Martians cartoon company Just Group could return soon. Rumours suggest new funding has been secured at 1p and that an industry 'heavyweight' has joined the board.

Speciality chemicals group Elementis, recently sold down to 31p following a profits warning, jumped 5 1/2p to 40 1/2p after a big seller was cleared out at 36p. More than 17m shares changed hands.

Packaging company British Polythene rustled up a rise of 44 1/2p at 349 1/2p on a bid approach. Avon Rubber held at 130p amid rumours of an imminent 200p cash bid from an American car components company.

Aim-listed upmarket wallpaper and curtains group Osborne & Little plummeted 57 1/2p to 335p after warning it would report a loss for the six months to end-September. Trading conditions were made worse by the 11 September attacks.