London shares surge in opening deals

Leading shares were surging in opening deals, with the FTSE 100 testing the 3,900 point barrier as tobacco and oil stocks advanced, while positive news from Oracle overnight aided second-line technology stocks, dealers said. At 8.59 am, the FTSE 100 index was up 67.9 points to 3,903.1, having earlier touched a high of 3,907.2.

All other indices were sharply higher, with the FTSE all-share jumping 28.80 to 1,875.91.

Volume was moderate, with 126 million shares changing hands in 11,928 deals.

The gain was also aided by a late rally on Wall Street last night which brought the leading indices off lows. The DJIA closed down 88.04 points at 8,447.35 and the Nasdaq composite was down 30.55 at 1,361.50.

Asia was mixed this morning, with the Nikkei 225 index up 43.56 points at 8,387.57, while the Hang Seng index ended the morning session down 66.34 points at 9,482.31.

On the economic front, the UK retail sales data for November will be closely monitored - particularly following anecdotal evidence that pre-Christmas sales have been slow. The data is expected to show a rise of around 0.4%, well down from the strong 0.8% increase seen in October.

At 3.00 pm GMT the leading US indicators for November will be examined for further clues on the strength of the US economy. Economists expect the data to have risen by 0.4%, compared with an unchanged figure in October.

US weekly jobs data is due before New York's opening, while the Philadelphia Fed survey will be released after the UK market closes.

In London, tobacco stocks were buoyed by news overnight that a California Superior Court overturned a $28bn (€27.3bn) damages award against Philip Morris to an ex-smoker suffering from lung cancer.

The judge said the record award was "excessive," and proposed an award of $28m (€27.3m) instead.

BAT was up 8 to 608, while Gallaher took on 1-1/2 to 597 and Imperial Tobacco jumped 4 to 1020.

The oil sector was also lending support ahead of the UN weapons inspection team's reaction to Iraq's weapons report. Reports suggested that chief weapons inspector Hans Blix will reject Iraq's declaration, causing the price of Brent crude to spike higher.

BP gained 5 to 418, BG Group added 5-3/4 to 253 and Shell was up 4-3/4.

Mobile telecoms shares were boosted by a report that the EU Commission's probe into roaming charges set by the four major European mobile operators is taking longer than expected, and an outcome is now not expected until early 2003.

Vodafone gained 3-1/2 to 113-1/2 following yesterday's news on the retirement of CEO Chris Gent, while mmO2 rallied 2 to 46-3/4 as Lehman Brothers chose the stock among its top 10 UK picks for 2003 and Cheuvreux raised its recommendation.

This helped reverse yesterday's weakness in both stocks following reports that the UK Competition Commission its set to enforce tightened price controls.

The banking sector was mirroring the positive market trend, with Northern Rock up 18-1/2 to 655, Abbey National up 12 to 499, HBOS firming 12 to 499 and Royal Bank of Scotland ahead 27 to 1,447.

Insurance stocks also had a sentiment boost after midcap Lloyd's of London insurer Hiscox revealed a qualifying quota share reinsurance arrangement with Warren Buffet's Berkshire Hathaway.

Hiscox crept up 1/2 to 142-1/2, while Aviva added 11 to 470 and Prudential gained 9-1/2 to 437.

Steelmaker Corus led the blue-chip risers, taking on 1-1/4 to 24-1/2 after reports that it has postponed a decision on the €750m sale of its aluminium business to French aluminium group Pechiney for a second time.

Media stocks were also buoyant, Reuters ahead 7 to 197 and WPP better by 17-1/4 to 469-1/2, also aided by raised guidance overnight from Australian peer John Fairfax.

On the downside, AstraZeneca slipped a penny to 2,199 after the Food and Drug Administration chose not to recommended approval of the new indication for Casodex 150 mg for the treatment of early stage prostate cancer.

The drugs group said that the recommendation by the panel does not impact the current use and approval of Casodex in its 50 mg formulation, and said that it also does not impact Casodex 150 mg approvals in other countries.

However, weakness in AstraZeneca was limited after shares slipped back yesterday in anticipation of a negative judgement. Shares rallied from an opening mark-down to 2,177.

Technology were dominating on the upside in the FTSE 250 after Oracle, the world's second largest software company, posted quarterly earnings 2 cents above forecast at 10 cents. The firm also said it believes the worst may be over and that it would return to growth.

Fellow software firm Misys was ahead 3-1/2 to 184 on the second line, while microchip designer ARM Holdings added 1-1/4 to 53 and communications gear maker Spirent jumped 0.80 to 17.

Elsewhere, construction firms were well bid after upbeat news from two housebuilders.

Construction firm Taylor Woodrow revealed trading in line with the board's expectations for 2002 and said the UK and North American housing markets are remaining strong, with its regional order book up 20% and 17% respectively. Shares added a penny to 160.

Meanwhile, housebuilder Persimmon revealed in a trading statement that annual profits should be at the top of market expectations. Shares held steady at 378.

The news gave a boost to Bovis Homes, up 2 to 335, and Quintain Estates, firmer by 5 to 235.

Mersey Docks was worst performer in the midcaps, down 43 to 474 after cautioning that continuing weakness in economic conditions is likely to affect trading expectations for next year.

The Liverpool-based ports operator said second-half trading was in line with expectations, but said the prevailing uncertainty suggested 2003 would be no better than 2002.

Retail stocks were marking time ahead of the key UK sales data, although Allders gained 1-1/2 to 165 after property company Minerva and investment bank Lehman Brothers agreed a £131.9m (€206.18m) recommended cash offer for the department store group.

Chemicals firm Yorkshire Group was the smaller caps' worst performer, down 4 to 9 after announcing a change of strategy to cut back its global growth strategy in favour of lowering debt via a sale of assets.

Yorkshire warned that the restructuring would mean profitability will take longer to reach than previously expected.

Artisan, the investment vehicle run by Stephen Dean, was down 1/2 to 3-1/4 after revealing it is to take a £2.2m (€3.44m) provision against its investment in Nasdaq quoted Stratus Services Group. This came as Artisan posted an interim loss against profits last year.

Anglesey Mining led the smaller cap fallers, down 1/2 to a penny after revealing a widening interim loss and saying the outlook remains poor.

Bid news excited Virt-X, with shares in the Europe-wide stock exchange jumping 75% after SWX Holding revealed it is in the advanced stages of preparing a potential offer. Virt-X shares leapt 4-1/2 to 10-1/2 after SWX said any offer would be at around 12.5 pence per unit, a 108% premium to yesterday's closing price.

CeNeS Pharmaceuticals gained 1/2 to 3-1/4 after revealing it has sold rights to one of its drugs for development as a treatment for drug addiction, while Simon Group added 2-1/2 to 30-1/2 after agreeing to sell its Simon Storage unit to Patron Capital for £63.85m (€100m) in cash.