Footsie fails to reach 6000

The London market took the rally that began with the start of the third quarter a stage further yesterday. At the end of a day featuring a sharp increase in turnover ascribed by dealers to buy-side programme trade activity plus a couple of big placings of stock, the FTSE 100 index finished comfortably ahead, up 40.3 at 5,960.2.

But the closing level was well below the session high, when the index climbed to within four points of 6,000 amid the morning burst of enthusiasm created by the US interest rate and Japanese bank news.

The FTSE Mid-250 also performed strongly, closing 23.4 up at 5,558.3, having hit a session high of 5,565.5.

The FTSE SmallCap maintained its recent poor run and was only 1.4 ahead at 2,601.7 by the close.

Some marketmakers continue to see the market as overbought; "a bubble waiting to burst" as one put it, but he conceded that more takeover activity would provide a prop for the market overall. Fund managers, too, have tended to adopt a cautious outlook for the British market.

"The outlook for the UK stock market is clouded by worries about the possibility that profits will be squeezed by rising wage costs and slowing sales growth," said Mr Russell Hogan, investment director at Scottish Equitable Asset Management.

"For now, we maintain a neutral view of the UK market, but we're watching profit trends carefully for signs that a more cautious stance is warranted," he added.

Sharp gains across the leaders and second-liners reflected general relief across most European markets that the US Federal Reserve's open market committee had decided to leave interest rates unchanged.

And there was also an element of relief that Japan duly announced the expected package of measures designed to put the Japanese financial system on a sound footing, via its bridge bank.

There was more encouraging news, too, for global markets with the release of the US employment report for June which was in line with forecasts, showing an expansion of 205,000 jobs over the month compared with a consensus forecast of 200,000.

Other details included a smaller-than-expected increase in average hourly earnings, which rose 0.1 per cent against forecasts of a rise of 0.3 per cent.

Although Wall Street drifted easier during early trading, dealers said there was no real downside pressure from the US data.

"It's much more likely that Wall Street is winding down for the long weekend break," noted one.

On the domestic front, there was overall relief with the Confederation of British Industry's June survey of distributive sales which showed a slowing of high street sales during June.

While seen as helping reduce the risk of another increase in interest rates after next week's two-day meeting of the Bank of England's monetary policy committee, the CBI report brought downside pressure on the retailing sector.

But the telecoms arena was ablaze with a spate of excellent new subscriber news as Orange announced record growth in the second quarter of its financial year. This squeezed a further 33p into its zesty shares, pushing the group up to 680p.

Vodafone followed with a rise of 23p to 819p, consolidating gains made yesterday after strong trading figures yesterday. There was exactly the same story with Cable & Wireless which gained 43p to 790p. Energis soared 60p to £10.12 1/2, while BT followed up 20p to 765p.

Meanwhile, traders raised their glasses to Britain's biggest cider maker HP Bulmer, even though it posted a slump in profits.

The firm is confident new management controls will allow it to turn around its fortunes and the City seemed to share this optimism it put on 5p to close at 346 1/2p.

Turnover in equities at 6 p.m. reached 1.07 billion shares.