George's comments prompt rebound

Some soothing words from Mr Eddie George, governor of the Bank of England, about the potential for a shift in interest rate policy, plus a recovery on Wall Street, produced a rebound in British stocks yesterday.

The FTSE 100 index was in negative territory for much of the session. But in the last 30 minutes of trading, Wall Street's rally, which saw the Dow Jones Industrial Average move into positive ground, plus Mr George's comments, saw Footsie race ahead to finish 13.1 up at 5,281.7.

Earlier, London's equity market had to cope with persistent bouts of profit-taking that drove prices lower, in spite of good news on UK inflation that showed the core figure for August had reached the government's target of 2.5 per cent. The inflation details were interpreted by some as opening the way for a reduction in British interest rates, possibly at the next meeting of the Bank's monetary policy committee, October 8th.

And all the European markets had generally ignored the statement from the Group of Seven finance ministers, promising concerted action to stimulate their economies if necessary.

Much of the blame for the widespread selling pressure in the leaders was laid squarely on Wall Street, which closed well below its session high overnight.

The positive performance of the market's leading stocks did not follow through into the rest of the market, however.

The second-liners, generally boosted at the start of trading, encountered some keen profit-taking too, leaving the FTSE 250 index 13.4 lower at 4,723.3, not far short of its session low of 4,719.9.

And the FTSE SmallCap also gave ground, an early modest advance giving way over lunchtime and leaving the index 4.1 lower at 2,089.9.