A GOOD set of corporate results bolstered the British stock market in the morning and with Wall Street making a strong opening in the afternoon, the FTSE 100 index regained the 3,700 level yesterday.
Figures from Glaxo, BAT and Guardian Royal Exchange were all better than expected shares in the latter two rose strongly, making them Footsie's best performers on the day. But early gains in Glaxo were eroded as analysts decided the figures were one off and that margins and profits growth would not be as good in future.
Mr Bob Semple, market strategist at NatWest Securities, said: "The corporate results haven't been that bad but where we go from here is determined by US economic data and their effect on the bond market." Mr Semple feels that US interest rates will rise, Treasury bond yields will hit 7.5 per cent and the British market will worry more about politics and he still expects Footsie to end the year at 3,700.
Yesterday a weaker than expected Chicago purchasing managers' report led to optimism about the Federal Reserve's next meeting on August 20th. According to Mr Ian Harnett, Britain group chief economist at SGST, "a number of pieces of weak data has led to a growing view that Mr Alan Greenspan (the Fed chairman) might have called the economy right and rates might not need to rise".
Thursday's second quarter gross domestic product figures and Friday's non farm payroll report will provide further evidence of the US economy's strength, and further tests of Wall Street's nerve.
Treasury bonds yesterday rose strongly on the Chicago report and the Dow Jones Industrial Average was around 38 points ahead at the close of London trading.
The FTSE 100 index, having been just 15.8 points ahead when New York started trading enjoyed a further spurt after 3 p.m. and ended the day 34.7 ahead at 3,703.6. The futures contract helped pull the cash market ahead and investors were buying the more liquid blue chip stocks the Mid 250 index rose just 11.5 to 4,230.6.
Yesterday's gain still meant that Footsie had recorded a decline for the third consecutive month; the Coppock indicator, a guide to medium term market momentum, has been falling since the end of March.
Volume picked up yesterday, with the help of yet another share buy back programme, this time from Thames Water, which acquired 10 per cent of its capital.
After a dismal Monday, the value of retail business on Tuesday climbed to £1.66 billion sterling, with the help of the NatWest share buy back.
There was plenty of corporate news to keep traders busy, with profits warnings from Pilkington (Footsie's worst performer) and Northern Ireland Electricity, a £476 million deal from bus and rail operator Stagecoach, and the renewal of speculation at Blenheim.
Gilts, however, were of little help to equities, with the benchmark 10 year issue closing unchanged.
