A sudden burst of actual and rumoured takeover stories brought a welcome change of direction to a London stock market bruised by last week's near 5 per cent setback, which was mostly induced by worries of further increases in British interest rates.
News of an agreed merger between EMI and the music arm of Time Warner, plus details of Cable & Wireless' proposed sale of its 54 per cent stake in Hong Kong Telecom, were behind excellent gains in the FTSE 100 and to a lesser extent the FTSE 250. So were details of the Clariant bid for BTP and a host of bid rumours elsewhere in the stock market. But leading stocks were unable to cling on to their best gains ahead of the onset of some important economic data in coming weeks from both sides of the Atlantic.
The FTSE 100 and 250 indices made an impressive start to the session fuelled by the hard news on EMI and BTP and was additionally lifted by the strong takeover hints involving Boots, United Utilities and Energis. The 100 index delivered a searing performance throughout the morning and into the early afternoon, hitting a session high of 6,480.4, up 134.1, only to drop away sharply for the rest of the day.
The other FTSE indices were less volatile. The 250 settled a net 15.8 ahead at 6,378.3, having touched a day's best of 6,395.4 and a session low of 6,363.3. There was no doubting the worst of the indices, the SmallCap, which remained firmly in negative territory and ended a net 1.9 off at 3,233.5.
This week's data will have significant implications for the direction of British domestic interest rates in the short term. It includes the December inflation report, retail sales news, the minutes of the January 13th meeting of the Bank of England's monetary policy committee, after which rates rose 25 basis points, and the first estimate of fourth-quarter gross domestic product. In the US, Wall Street is bracing itself for details of the employment cost index for the fourth quarter of 1999 and GDP data for the same period. Dealers said it was the abrupt about-turn in the Dow Jones Industrial Average that took the wind out of London's sails. The Dow pushed up 114 points in the first 10 minutes following Wall Street's opening, only to post a 56-point fall in less than an hour.
"To see 100 points wiped off the FTSE 100 in such a short time is a worry; you get the feeling this market is lacking guts," he warned. Turnover in equities was a hefty 1.8 billion shares.
