Footsie eyes the 4,000 barrier

THE upside momentum behind London stocks built up strongly during the last hour of trading yesterday with the FT-SE 100 index accelerating at such a pace as to look like threatening the 4,000 level at one point.

Although failing by less than eight points to run through 4,000, the FT-SE 100 still managed to reach a new peak of 3,992.2, up 38.5, as the first trading session of the fourth quarter saw the big domestic and overseas institutions pour cash into the market.

Second-line stocks were somewhat overshadowed by the leaders, but managed to record good gains across the board, lifting the FT-SE Mid-250 index 18.7 to 4,409.8. The FT-SE SmallCap underperformed, however, ending the session only 4.2 ahead at 2,71.3.

Senior market-makers insisted, however, that the FTSE 100 was poised to cruise through the 4,000 barrier at the outset this morning, "given a reasonable showing by the Dow and US Treasury bond market". After-hours trading in the FT-SE future indicated an opening level of almost exactly 4,000.

The influx of new money into the market was first felt in the FT-SE future, which was always in strong demand and traded at a big premium to the underlying cash market throughout the session.

Although always well supported during the early part of the day, the stock market staged a determined dash just before the close, with dealers reporting evidence of a substantial trading programme, heavily weighted on the buy side.

The programme was said to have involved the purchases of large lines of stock in Legal & General, Barclays Bank, RTZ, Lloyds TSB, SmithKline Beecham, Tesco, BSkyB, BP, Blue Circle, Shell and P&O, as well as numerous other leading issues.

UBS, the Swiss-owned securities house, was aggressively bidding for most of the leading stocks just before the close.

Early strength in share prices stemmed from a sparkling return to the market for Imperial Tobacco, newly demerged from the Hanson Group and whose shares eclipsed even the most optimistic expectations, closing at the top of the FT-SE 100 performance table.

And the return of the ever-present bid stories circulating in the market over recent weeks produced some outstanding gains among the banks and insurances, as well as a sprinkling of stocks across other sectors.

News of a stronger than expected UK National Association of Purchasing Managers index for September caused some momentary jitters in the gilts market, where initial gains of between eight to 10 ticks were shaved, before that market regained its momentum later in the day.

A relatively stable opening by Wall Street in the wake of a weaker than expected US National Association of Purchasing Managers index, did little to choke off demand for British shares.