A good run…

The London market recovered to a three week high last week, with the oil price coming off recent highs after Federal Reserve Chairman Alan Greenspan said that rising inventories may ease the current price frenzy.

Quentin Smith at OMUK says the market was buoyed by continued bid speculation, with drinks maker Allied Domecq (+20.6% to 643½p) a potential target, while Shell (+3.4% to 491½p) also advanced amid speculation that it could launch a full takeover for Australian oil company Woodside.

Shell holds a 34% stake in Woodside, but its purchase of the comp[any was blocked in 2001.

The HBOS house price survey showed prices rising for a third month in four in March, supporting the view that seven months of unchanged interest rates are underpinning property prices. HBOS reported prices rising 0.5% on the month following a 0.5% decline in February, giving a year on year rise of 9.7%.

Manufacturing production unexpectedly fell for the first month in six in February after declines in chemical production and the paper, printing and publishing industries. Manufacturing, which accounts for 17% of the economy, decreased 0.5% from January, while the previously reported January gain was revised to no change. The year on year rise was 0.9%.

The faltering manufacturing recovery may convince the Bank of England’s Monetary Policy Committee to leave interest rates unchanged for a prolonged period. Industrial production, which includes mining and utilities, contracted 0.4% on the month and 0.1% on the year.

The Bank of England left its benchmark interest rate unchanged at 4.75% for an eighth consecutive month at its monthly meeting amid evidence that consumer spending, the largest part of the economy, has yet to recover from the slowdown at the end of last year.

Bank of England policymakers have indicated that they will not raise rates until consumer spending has rebounded, although they expect current weakness in consumer spending to be only temporary.