A POWERFUL opening performance by Wall Street in response to the dream ticket" US election results, where President Clinton was re elected with a Republican Congress, rescued the London market from a turbulent trading session.
Earlier, a 25 point gain in the FT-SE 100 was almost wiped out following publication of the Bank of England's quarterly inflation report, which called for further increases in domestic interest rates, triggering a flurry of selling across the equity market.
But the London market's confidence returned as the Dow Jones Industrial Average powered to a 50 points plus gain shortly after it opened.
When the dust had settled in the market place, the FT SE was left with a 14.6 gain at 3,935.7 after a swing of almost 35 points.
But the mid session damage was generally confined to the FTSE 100 leaders. The second liners, represented by the FT SE Mid 250 index, were never under any exceptional selling pressure, with that index ending the day a net 8.7 up at 4,413.9.
Even at its worst yesterday the index was four points higher. The FT SE SmallCap index settled 1.7 firmer at 2,162.6.
The market, and specifically the FT SE Mid 250, was also given a big boost by a fresh burst of takeover speculation in the regional electricity stocks, which are heavily represented in the 250 index.
Talk in the market suggested that a share bid for East Midlands Electricity was imminent.
Some traders were speculating on another US sourced bid. An hour after the market closed, Dominion Resources of the US said it was considering a bid for the British group.
Shares kicked off the day in confident form, responding to Wall Street's near 40 point rise and the one point gain in the US long bond in the wake of the US election news.
Dealers said news that the Republicans had retained control of the US Congress was positive for the market in that they could block any perceived reckless, spending plans by President Clinton.
But the Bank of England's inflation report put paid to the market's initial flush of enthusiasm, stating that without further increases in rates the British government's 2.5 per cent target for inflation by spring 1997 would be unattainable.
