Footsie inches to a new high

SMALL pockets of profit-taking and general nervousness ahead of the latest statements from Mr Alan Green span, chairman of the US Federal Reserve, put London's equity market under pressure for much of yesterday.

But a strong opening by Wall Street gave investors in London renewed confidence and the FTSE 100 index ended the session at a new record close.

The Dow Jones Industrial Average was up around 40 points as London closed for business. It was responding to comments from the Fed chairman, who told economists prior to his second part testimony to Congress that if analysts' earnings forecasts were correct then Wall Street was properly valued.

Footsie settled 2.4 higher at 4,360.1. The FT-SE 250, meanwhile, was never under any real pressure and shrugged off any early flurry of selling in the second liners, eventually finishing the trading day on a strong note, up 12.0 at a new intra-day and closing record of 4,678.6.

Smaller stocks were the only disappointment, with the SmallCap never able to struggle into positive ground and finishing 0.1 lower at 2,353.1.

Dealers said London had behaved remarkably well during a difficult morning which saw some of the more nervous fund managers book profits in the wake of the worryingly steep 66 points fall in the Dow overnight.

The forces said to have driven Wall Street lower included revived concerns about the pace of US economic growth.

There was also some anxiety about the poor performance of gilts, which always looked vulnerable and which eventually fell around a full point at the long end, mirroring some hefty falls in German bunds. The latter, as well as most European debt instruments, weakened amid renewed concerns about a delay in the single currency timetable.

The regular monthly meeting between Mr Kenneth Clarke, Chancellor of the Exchequer, and Mr Eddie George, governor of the Bank of England, brought, as expected, no sign of a change in British interest rates.

Marketmakers said London, after its early retreat, had felt increasingly comfortable as the day wore on. One said: "There was plenty of new money coming into the market and chasing increasingly small amounts of available stock. The institutions are awash with cash and there is more to come as the inflow of PEP (personal equity plan) money builds up.

He said the general perception that Wall Street was seriously overvalued was causing few worries in London where the market is increasingly well supported.

Talk that a bid/merger is being assembled in the insurance sector continued to drive the life and composite stocks. Potential bidders were said to include the Halifax Building Society, soon to assume banking status, as well as a long list of British, European and Japanese companies.

Turnover at 6 p.m. was 810 million shares. Customer business on Monday was a massive £3.5 billion sterling, thanks to buy-backs in Southern Electric and Yorkshire Water.