City celebrates as FTSE indices sparkle

It was a good day all round for London's equity market, with investors continuing to respond to the more relaxed view on the short-term outlook for domestic interest rates.

There were other positives for the market with sentiment in many of the "old economy" stocks, so badly dented since the turn of the year, picking up appreciably after another minor decline in sterling.

Among the best of such stocks yesterday was Marks & Spencer, whose shares were sufficiently energised in the last 30 minutes of trading to make them the best performers in the FTSE 100 on the back of a burst of takeover stories.

Earlier, the market had responded to a powerful performance overnight on Wall Street, where the Dow Jones Industrial Average finished 89 points ahead, having been up 165 points at best. Even more impressive were the performances of the Nasdaq Composite and Russell 2000, both of which raced to record highs.

Wall Street came in on a firm note yesterday too, although the Dow struggled to maintain its early progress as London trading drew to a close. The Nasdaq, however, hit another high as the Dow wilted.

But it was the better feeling in the market about interest rates which had the biggest influence on sentiment throughout the session, dealers said. Recent comments by members of the Bank of England's monetary policy committee, to the Treasury Select Committee and elsewhere, were interpreted as indicating that rates would be left alone, anticipating a decline in sterling.

At the finish of a session brimming with excitement, the FTSE closed 132.3 ahead at 6,364.9, its fourth three-figure gain in six sessions. Over that period, the 100 index has risen a massive 350.2, or 5.8 per cent. London's blue-chip index is still 585.7 shy of its intra-day peak, 6,950.6, reached on the last trading day of 1999.

There were equally scintillating performances from the other FTSE indices. The 250 raced up 165.4, or 2.6 per cent, to 6.616.6, only 9.6 short of its closing record and only 35.5 away from its intra-day peak reached on January 18th.

Dealers said the recent change of heart in the market, triggered by the interest rate/sterling theories, could well run on and possibly see the FTSE 100 launch a challenge on its record level.

Just as impressive was the performance of the smallcaps, where the FTSE SmallCap index hit intra-day and closing highs, boosted by a resurgence of interest in many of the biotech stocks which, having fallen from grace a couple of years ago, have risen strongly in recent weeks.

At its best, the FTSE Smallcap hit 3,375.0, before ending the session a net 38.2 up at 3,374.2. Turnover in equities reached 2.5 billion shares.