Blue-chip gains as Footsie bounces at 5,000 level

Blue-chips made modest gains on a quiet day for the UK market with the FTSE 100 index once again showing its ability to bounce at the 5,000 level.

The index had faltered on Friday in the face of terrorism fears and a weak survey of German business sentiment. But Footsie was never in negative territory yesterday and closed with a 52.7 point gain at 5,070.4. However, volume was subdued by recent standards. Having passed three billion and even four billion in recent weeks, turnover hit just 1.7 billion shares by the 6 p.m. count.

The international background was fairly positive.

European markets were strong throughout the day and when Wall Street opened, the Dow Jones Industrial Average and Nasdaq Composite saw brief opening declines before moving modestly higher.

Domestic economic news was mixed. The leading indicator compiled by NTC Research showed a rise for the 11th consecutive month and reached its highest level since December 1996. But a survey from the Institute of Directors showed that business confidence had fallen to its lowest for three years.

On the corporate front, there was a profits warning from FTSE 250 constituent National Express, the transport group and some disappointing figures from Colt Telecom. As a consequence, the FTSE 250 failed to keep up with the blue chips, falling 49.5 to 5,342.4.

At the smallcap level, there were profit warnings from Genetix, High-Point Rendel and Zoo Digital. The SmallCap index inched ahead 0.9 to 2,327.0 while the Techmark 100 gained 7.85 at 1,330.14.

There was a bounce in media stocks on hopes that Carlton and Granada might abandon the loss-making ITV Digital while oil giants BP and Shell were stronger on hopes that OPEC production cuts would bolster the crude price.

The strategy team at HSBC said that "we believe an absolute floor to the FTSE 100 is at 4,200, as at this level the dividend yield on the market is at a 35-year high relative to inflation, short rates and bond yields. Our short-term forecast for the market is 4,700 for December 2001, implying a decent recovery from the low point but some weakness from the current level".