The FTSE 100 continued its march into new high ground yesterday, hitting intra-day and closing peaks and only just failing to drive through the 6,500 level. At the close of business, the FTSE 100 was a net 57.9 ahead at 6,473.2, a two-day gain of 143.2, or 2.3 per cent. Also hitting new records was the FTSE All-Share index which finished at a closing high of 2,963.26, after an intra-day peak of 2,971.79. Meanwhile, the FTSE 250 jumped 41.8 to 5,498.5, having just failed to penetrate the 5,500 level, topping out at 5,499.6, while the FTSE SmallCap ended at 2,411.1, up 4.1.
The start of the new tax year means that advance corporation tax has now been abolished. As a result, the published dividend yield on the AllShare has fallen sharply, dropping from 2.6 to under 2.3 per cent. The yield ratio, the calculation which compares bond and dividend yields, has leapt from 1.8 to around 2. Once again it was the prospect of interest rate cuts both in the UK and in the euro zone, possibly as early as today, that was the main driving force behind the strong gains in London's equity market.
Those gains looked even more impressive during initial trading given Wall Street's rather disappointing closing performance overnight when the Dow Jones Industrial Average finished 43 points lower having once again failed to hold on to the 10,000 level. The Dow recaptured the 10,000 level in early trading yesterday, before losing its grip on that number.
Dealers and economists were mostly confident that the Bank of England's monetary policy committee would deliver another reduction in domestic interest rates when it announces its decision at midday today. But some observers were not quite so convinced about the certainty of a rate cut after a batch of stronger-than-expected economic data was announced yesterday.
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