THE FTSE 100 index burst into new high ground in response to Wall Street's strength, illustrated yesterday by a near 100-point gain on the Dow Jones Industrial Average in early trading.
News of the bid approach to Energy Group, announced after hours, looks certain to impart further strength to a London market eager for takeover news. The bid should inject £3.6 billion into the market.
Apart from the all-pervasive influence of Wall Street, London dealers said the domestic market had been caught "horribly short" of stock, after a mid-morning attempt by marketmakers to drive share prices lower was met by a legion of buyers.
Footsie passed both its previous closing high of 4,693.9 and the intra-day peak of 4,723.7, reached on May 16th, as the index ended an ebullient session 52.9 or 1.1 per cent ahead at 4,739.6. Over the past four trading sessions, Footsie has risen 182.5 or 4 per cent.
A senior marketmaker at one big European securities house said the afternoon brought an element of panic buying from some of the big funds known to be under-weight in the market. "There is some powerful buying behind the market at present and no signs of it stopping at the moment," he said.
Those sentiments were echoed by the head of marketmaking at another top London firm. "The market feels unstoppable; it is the weight of money argument again. The big sectors with heavy weightings, such as the banks and pharmaceuticals, are running strongly. The Norwich Union and Woolwich flotations will go well and the feelgood factor has arrived in the stock market."
Norwich Union shares were quoted at 337p-347p yesterday by City Index, the financial spread betting company. The marketmaker added there was evidence that some of the money leaving European markets, which have been affected by the problems over European monetary union, has found a home in the UK and US, seen as safe havens.
Prior to its four-day run, the Footsie had fallen for six straight sessions as investors fretted about the potential for rate rises in the UK and US as well as the Labour party's first Budget on July 2nd. come of the market's sceptics who persist with the view that London has been overbought, are still predicting a rise in US interest rates on July 2nd when the Federal Open Market Committee next meets.
While the leaders were setting a searing pace, the second liners and smaller capitalised stocks failed to keep up. The FTSE 250 rose a pedestrian 13.2 to 4,497.3, while the FTSE SmallCap actually lost ground on the day, falling 0.1 to 2,279.4.
Alliance & Leicester and Halifax were aggressively bought ahead of today's meeting of the FTSE steering committee, which should see both stocks included in the Footsie. Smith & Nephew and Burton are the most likely relegation candidates.
Turnover at the 6 p.m. count was 872 million shares.
