Equity market regains composure

A RETURN of confidence on Wall Street, coupled with a strong showing by gilts, helped the UK equity market gradually regain its composure yesterday.

But the market never looked comfortable until the last hour of trading when Wall Street moved into top gear, with the Dow Jones Industrial Average posting a 40 point rise ahead of some crucially important economic data.

By the close of trading, the FTSE 100 index had moved up to a day's high of 4,389.7, up 20 points. The index was said to be looking to break through the 4,400 level once again, if Wall Street maintained its composure.

There was no disguising the lack of interest across the rest of the stock market, however. The FTSE 250 index was always in negative territory, falling 7.4 at its worst on the day to reach 4,493.1, before rallying to end the session a net 4.3 lower at 4,496.2. Similarly, there was very little support for smaller capitalised stocks; the SmallCap index finished 3.5 down at 2,295.2.

Although Thursday's general election remained one of the day's biggest talking points, market makers said the welter of press reports at the weekend suggesting a comfortable Labour victory played little or no part in the market's performance.

"The only business generated in the market by the election stories was a sharp increase in betting on the outcome of the election by dealers across the City," said one trader.

He said the main focus of attention during the day was on Wall Street, which has to cope with news of consumer confidence and durable goods orders today, first quarter gross domestic product, due tomorrow, the purchasing managers' report on Thursday and - most importantly - the non farm payroll report for April, expected on Friday.

Observers said the week's data would provide crucial pointers to the outcome of the next Federal Reserve Open Market Committee meeting on May 20th. Another increase in US interest rates is expected by some observers following the meeting.

Turnover at 6 p.m. reached 673.8 million shares, relatively high for a Monday, but that figure included 72 million shares traded in two of the market's penny stocks, Dragon Oil and Minmet, which attracted 54 million and 18 million shares respectively.

Financial stocks once more attracted heavy buying interest, partly because of the recent successful flotation of Alliance & Leicester, the building society turned bank, but also because of growing enthusiasm about the forthcoming flotations of the Halifax and the Norwich Union. Banks and insurances occupied eight out of the top nine places.