LONDON'S equity market went some way to regaining its confidence yesterday, putting on a show of good gains across the board, although closing well off the day's best levels.
The impressive performance came in the wake of Wall Street's remarkable turnaround overnight, when the Dow Jones Industrial Average, after sliding over 50 points, rallied strongly to close 32 points higher on balance.
There was also an injection of confidence into global bond markets by the performance of US Treasuries, although both the Dow and bonds were looking uneasy during early trading yesterday afternoon.
British stocks, along with other big European markets, had been jolted by news of the US attacks on Iraqi installations and by fears that the US Federal Reserve was preparing a 50 basis points rise in US interest rates.
The FT-SE finished the day 16.8 higher at 3,872.7, while the FT-SE Mid 250 index moved up 20.6 to 4,406.0.
Dealers in London refused to get carried away by the market's good recovery. "It would be foolish to chase this market too hard with the US August non farm payroll report just around the corner and the very likely prospect of a rise in US rates pretty soon after," said one trader. Other dealers said London was looking increasingly vulnerable, according to chartists.
London was also bracing itself for news from the regular monthly monetary policy meeting between Mr Kenneth Clarke, Chancellor of the Exchequer, and Mr Eddie George, governor of the Bank of England, held yesterday afternoon.
The market was given a substantial shot in the arm at the outset with news of the £260 million plus agreed bid for Nurdin & Peacock, the food cash and carry retailer from Booker, the food distribution group.
Helping fuel the initial upward move in prices was a clutch of good trading reports, notably from Cadbury Schweppes and BBA Group as well as the customary buzz of takeover stories.
There were plenty of casualties in the market, however. The media/broadcasting sectors were given a shake first thing by a report suggesting that the Labour Party may be considering a specific tax on the television companies and that any such tax might encompass the cellular phone companies, such as Vodafone and Orange.
Schroders the merchant bank, attracted a flurry of support throughout the day, on a mixture of vague takeover talk and an expectations of good interim results tomorrow.
Turnover was a disappointing 610 million shares. The value of retail business on Tuesday came out at £1.9 billion, double Monday's figure, which was affected by the closure of US markets.
