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FTSE 100 firm, drifting

below best, Dow seen up

LONDON: UK shares were firm in afternoon trading on Thursday, boosted alongside gilts, by news of a surprise 1/2 point cut in German interest rates.

By 1250 GMT the FTSE 100 was 14.5 points up at 3,820.1 after a high of 3,828.3 and the Mid-250 index of second line shares was 24.4 points higher at 4,488.5, a new peak.

"The Bundesbank's move caught people on the hop - I think most had been expecting a 1/4 point cut at most. Takeover talk is still around and market makers seem to be short of stock," one head of sales trading said.

FTSE 100 gainers led losers by 58 to 33.

The Dow is expected to open higher after after IBM led the market to a 70-point fall Wednesday.

Earlier news on UK fundamentals underpinned sentiment and helped dilute concerns raised after yesterday's news of robust jobs and average earnings figures.

March retail prices rose within expectations at 0.4 percent in March, and the PSBR at 9.5 billion stg also for March compared with a consensus forecast of 9.8 billion.

The UK Treasury said it expects a further decline in the inflation rate and said the PSBR was on a declining trend, helped by tight controls on government spending.

Takeover speculation continued to swirl in the electricity sector. London Electricity surged 41p to 826 and is viewed as the most likely next bid candidate, analysts said.

National Power was 8p higher at 868 after rejecting an offer to meet Southern Co. The U.S. utility said yesterday it was considering a merger with the British generator.

British Telecom added 8-1/2p to 381 and Cable & Wireless firmed 14p to 536 after an article in the Financial Times said the two may announce an agreeement to merge before approval is given. C&W also benefitted from talk that one broker had valued the company at 575p per share, dealers said.-Reuter