London's equity market staged a spirited fightback yesterday, with the leaders rallying strongly before coming off the boil towards the close, after taking a two-day battering that lopped almost 150 points off the FTSE 100 index.
The FTSE 100 ended the session a net 16.2 up at 5,820.2, but was a long way off its best of the day, when it raced up 58.1 to 5,862.1.
Another unusual burst of strength in BT, ahead of the close of the UK's biggest ever rights issue - the stock is quoted ex-rights from this morning - was a source of solid support for Footsie, as was news of the resignation of Hays's managing director, which was followed by a big rally in the group's shares.
A number of banks and many defensive stocks also helped prop up the blue-chip benchmark.
But there was no such help for the FTSE 250, which dropped 34 to 6,533.1, weighed down by interest rate sensitive sectors such as the housebuilders, where George Wimpey, Taylor Woodrow, Bellway and Berkeley Group were big casualties. The FTSE SmallCap eased 0.7 to 3,126.4.
The market's rally was triggered by Wall Street's about turn on Tuesday evening when an earlier 133 points slide in the Dow Jones Industrial Average was transformed into a closing gain of 26 points and a 60 points slide in the Nasdaq Composite was almost entirely reeled back in.
Some dealers were rather perplexed by the rallies on both sides of Atlantic.
"The bad news hasn't gone away - I'm slightly surprised at the market's resilient performance," said one salesman, referring to the Nokia profit warning on Tuesday, which unnerved investors, and the much worse-than-expected UK inflation data for May.
That saw the market reel back amid growing concerns that the current cycle of UK interest rate cuts has finished and that the next move in rates probably before the end of the year will be up. Yesterday's economic news, average earnings for the quarter to end-April, were broadly in line with forecasts and came in at plus 5.2 per cent, year-on-year.
Sentiment was eroded during the last hour of trading as the market became uneasy about Wall Street's ability to hold on to current levels in the face of further earnings shocks and economic concerns.
