"THE way the market closed today you would never have thought that the FTSE 100 was showing a 168 point fall only one trading session ago," mused an old market hand in London yesterday.
Closing at the day's best and easily recapturing the 4,000 level, the FTSE recouped 48.6 points of Friday's 88.2 loss, ending the day at 4,011.6.
The astonishing turnaround in sentiment in the British market, as well as across Europe and Asia, reflected the resilient performance of Wall Street late on Friday, when it reduced an earlier 140 point decline on the Dow Jones Industrial Average to a 55 point drop.
And yesterday's opening performance by the US market, whose trends are almost invariably followed by the rest of the world, was also impressive. The Dow quickly climbed more than 40 points and an hour after London closed, was 37 points ahead.
Friday's slump in global markets came in the wake of remarks made by Mr Alan Greenspan, chairman of the US Federal Reserve, which were interpreted by many investors as a warning about an overvalued Wall Street.
Some commentators adopted a defensive stance after the market's reaction to Mr Greenspan. Mr Philip Wolstencroft, UK strategist at Merrill Lynch, said: "We are mildly bullish on the UK market for 1997. The economic backdrop hasn't changed, [Mr] Greenspan has simply said the US stock market is expensive. We agree; the UK market has lagged the US in a big way and UK company directors have been avid buyers in November. We would use price weakness to reinforce our 4,200 objective for the FTSE 100."
At NatWest Securities, Mr Bob Semple insisted: "The downside to the UK equity market is limited; at current levels UK equity valuations are not demanding. Earnings and dividend growth particularly, are robust, while institutions are sitting on above average levels of cash. Buy into the red."
The market's fragility at the end of last week was not solely confined to the spillover from the US and Asia. Dealers continued to point to Conservative Party infighting over Europe. They also said the market would have to contend with tomorrow's meeting between the Chancellor of the Exchequer, Mr Kenneth Clarke and the governor of the Bank of England, Mr Eddie George as well as Thursday's by election.
One common feature of the last two trading sessions was the relatively low levels of activity. Turnover at the 6 p.m. reading yesterday came out at an unremarkable 549.4 million shares, well down on Friday's 726.3 million turnover.
But a close scrutiny of Friday's turnover showed that trading between market makers accounted for one third of overall business, well above usual levels.
