Footsie fails to reach all-time high


A POSITIVE early performance by gilts, renewed takeover speculation across various sectors of the market and talk of a substantial buy programme focused principally on the financial stocks, drove British equities higher yesterday.

In the background, the latest Confederation of British Industry survey of distributive trades painted a relatively healthy picture of the British retail scene.

And Tuesday's news that the Nationwide building society had taken a further step in increasing the pace of the mortgage price war did no harm to sentiment.

The news was interpreted by some in the market as possibly front running another reduction in interest rates.

Wall Street's continuing uncertainty, which saw the Dow Jones Industrial Average lose over 120 points in two days after last week's US non farm payroll report, was among the market's only real worries yesterday. The Dow came under renewed pressure, taking the top off London equities and introducing real worries about the market's ability to make any substantial further progress in the short term.

The Dow fell away early on in the wake of US treasury bonds, which began to back off, taking gilts with them. Around 90 minutes after the close of trading in London the Dow was showing a marginal increase on the session.

Nevertheless, the impetus behind the London market for much of the day was such that the FTSE 100 looked like taking a run at its all time closing high and its intra day peak. At its best of the day, 3,775.1, shortly after midday. much the FTSE 100 was only 6.2 short of its previous closing beak and 17.4 away from its intra day best, which it reached last month.

Market makers said a substantial trading programme, heavily weighted on the buy side and said to have been executed by BZW, was a prime motivation behind the markets initial strong performance.

Footsie ended the day a net 8.8 ahead at 3,767.4, while the FTSE Mid 250 index, representing the market's second line stocks, rose 10.0 to 4,387.1.

There was good news for the City's big trading houses in the level of activity, which expanded rapidly from Tuesday's rather depressed level of 61 6 million shares. At 6 p.m., turnover reached 797.3 million shares, with non Footsie stocks accounting for justover half the total.

Around the various sectors, the banks caught the eye, mostly ignoring the latest developments in the mortgage price war and responding instead to news of the merger discussions between CS Holding and Union Bank of Switzerland.

Some traders said a merger of the two Swiss giants would lead to further consolidation in the British banking arena. The two Scottish banks, Royal Bank of Scotland and the Bank of Scotland, and Standard Chartered, long viewed as prime bid targets, were among the best performing Footsie stocks.

BP and British Gas continued to attract exceptionally heavy trading activity, with both stocks closing well up on the session amid persistent speculation that the former could be running a slide rule over the latter.