Blue-chips score a record points rise

Four consecutive trading sessions of losses, with the last three bringing three-figure falls, were brought to a halt yesterday as London's equity market responded to increasing optimism over global interest rate trends.

Such was the power behind the rebound that the bounce in the FTSE 100 took the index up 205.3, or 4.4 per cent, thereby recouping almost half of the 9 per cent fall that the market sustained during the four sessions.

It was the biggest single-day's gain in points terms on record.

Market-makers in London, hammered on the downside in recent weeks and months, remained sceptical of the market's ability to build on yesterday's recovery.

"The market is already discounting a 25 basis points cut in British interest rates and a 50 basis points reduction will not produce that much upside," was the view of one senior trader.

Others, however, adopted the view that the market had been oversold in reaction to the near-collapse of Long Term Capital Management, the US hedge fund. That produced a headlong flight to safety.

London's gains were triggered in the first place by Wall Street's strong closing performance overnight, when the Dow Jones Industrial Average rallied substantially from being 230 points down to finish 58 points lower.

While the front line stocks posted record one-day gains, the FTSE 250 index jumped 73.0 to 4,377.0, helped by a surge of buying interest in the engineers and other exporting stocks.

The dark clouds continued to hover over the smallcap stocks however. The FTSE SmallCap index finished 0.8 off at 1,863.9 and smaller stocks now yield more than gilts.

Turnover was sharply higher yesterday, reaching 1.2 billion shares.