Another sterling day for Footsie


British stocks gave another pleasing performance yesterday with big gains stretching across the market and fears of an interest rate rise receding.

All the main FTSE indices reached new intra-day and closing records, with the FTSE 100, the leading market measure, hurdling the 5,900 level during the last minute of trading.

A series of economic news items was interpreted by the market as reducing the chances of a further increase in British interest rates. Unemployment fell by less than expected, average earnings in January rose by less than forecast and retail sales fell by twice as much as the consensus forecast.

Average earnings in February were up 4.5 per cent, compared with some forecasts of a 5 per cent increase, while retail sales fell 1.2 per cent but had been expected to fall about half that amount. Unemployment, down to 4.9 per cent of the workforce, had been expected to drop by more than 17,000 but come in down 13,700.

Market-makers, already pressured by bursts of buying interest shortly after the start of trading - triggered by what was viewed as a market-neutral and thus unthreatening budget - were subsequently wrong-footed by the sudden surge of large-scale buying interest from institutions.

The economic news prompted steep gains in the equity market but failed to head off sterling's continued strength, which saw the Bank Of England's trade-weighted index rise to 107.5 at the end of the session, the highest for nine years.

The FTSE 100 index, which trembled at the outset, subsequently stabilised then moved ahead strongly to launch a series of attacks on the 5,900 level, only penetrating the big number during the last minute of the trading. It closed 68.7 ahead of a record intra-day and closing high of 5,903.36.

The FTSE Mid-250 continued to drive ahead, hitting new intra-day and closing peaks, finishing the day 21.8 ahead at 5,424.9, after an intra-day peak of 5,425.0.

Similarly, the FTSE Small Cap ran up to new heights, closing 10.3 up at 2,575.6

Wall Street, which had given the market limited comfort at the start of the session after its 31-point gain overnight, was less than supportive yesterday, giving ground to post a 40-point slide after a level opening.

Dealers said London had responded once again to the weight of money pouring into the stock market.

"The doubters are gradually changing their minds about the market's potential to hit 6,000 on the FTSE 100; it really is building a head of steam which could see it through that level in short order," said one dealer.

Some observers adopted a more cautious view of developments on interest rates: "This is a market living under the threat of a very significant tightening of monetary policy," warned Mr Richard Jefrey, economist at Charterhouse Tiney.

Budget-driven stories saw the casino stocks badly affected, while the prospects of a more stringent tax regime affected oil shares.

Volume was 898.1 million shares at 6 p.m. count, of which just over half was in non-Footsie stocks.