Market miserly in festive season

THE British equity market limped towards the long Christmas holiday yesterday, responding grudgingly to Monday's gains on Wall Street. Low turnover and a tight trading range suggested that fund managers had already positioned themselves for the year-end.

The FTSE 100 index closed 31.6 points higher at 5,049.8, comfortably in line with the second wave of economists' forecasts made in the summer.

The index was also some 15 per cent above the consensus target made at the start of the year.

Normally, the market would be delighted with such a performance. But a good year for marketmakers has been offset by the introduction of the orderdriven trading system.

And institutional investors still have to worry about the prospect for a further big Asian upset, given that they will be unable to react from midday today until Monday.

A raft of chunky economic data is expected to be announced in Tokyo on Christmas Day and Stephen's Day. Any significant deviation from expectations could trigger another slide in the hardpressed Nikkei 225 average.

Furthermore, there is concern that fourth-quarter results in the US might disappoint and prompt sharp corrections in individual stocks.

On the other hand, a surge in British liquidity is expected in the first few weeks of 1998 and, considering that institutions already have the highest cash weightings for years, it would take a large dollop of bad macro-economic news to mop it all up.

A senior salesman at one of the bigger agency brokers said: "Japan is the big worry. But there is about £17 billion sterling to come back to the funds in the first five or six weeks of next year because of all the bids and special dividends. That cash has to go somewhere."

With Japan closed yesterday for the birthday of Emperor Akihito, the market was able to concentrate on the positive.

Footsie opened softly but shrugged off a wider-than-expected trade deficit - the global figure came in at £1.35 billion against a consensus of £1.2 billion - and headed slowly higher.

There was a pause in mid- afternoon when the Dow Jones Industrial Average traded 50 points off within a few minutes of the open. However, the US market recovered later and government bonds held their nerve so Footsie built on the earlier gains.

The FTSE 250 rose 4.5 to 4,706.3 and the FTSE SmallCap index eased 1.0 to 2,291.3.