Footsie proves resilient and closes on a positive note

It was a sombre session in London's stock market yesterday as marketmakers and analysts reluctantly returned to work, still shocked by the terrible events in the US on Tuesday, with terrorist attacks on the World Trade Centre in New York and the Pentagon.

"Working in this business means that you talk to the States almost non-stop and the stories unfolding obviously involve some of those people; it is truly dreadful," said one salesman.

With Wall Street closed on Tuesday and yesterday and the market unsure when it would reopen, there had been widespread fears that London would open under heavy selling pressure. The steep declines in Hong Kong and Tokyo added to the unease in London at the start of trading.

The FTSE 100 duly fell sharply at the outset, sliding 94 points to a session low of 4,651.8 minutes after the 8 a.m. opening, only to rally swiftly and hit 4,881.5, up 135, not long afterwards. Although there were a few hiccups on the way, the FTSE 100 moved up a gear in the afternoon session, eventually closing at the day's best, up 136.1 at 4,882.1. But while the 100 index was progressing and the Techmark 100 managed a minor improvement, the FTSE 250 and SmallCap both suffered. The 250 finished 78.2 off at 5,521.2, having been as low as 5,474.5 earlier in the day, and the SmallCap dropped a disturbingly large 73.1, or almost 3 per cent.

Turnover in London was surprisingly robust, eventually reaching 2.23 billion shares by the 6 p.m. cut-off point. Dealers said the closure of Wall Street meant that any US investors looking to trade would have to use London, the largest market outside of the US in terms of liquidity.

Explaining the divergence of the FTSE 100 and the 250 and SmallCap indices, some market observers said the big domestic institutions had moved in to support the market in a successful attempt to restore some much-needed confidence after the heavy falls of the past few weeks. And another explanation for the unexpected strength of the leaders was that the Financial Services Authority's decision not to force UK life assurers to sell equities into a falling market, to maintain their solvency ratios, had seen the life companies recalling stock lent to hedge funds.