Giant step forward for Footsie

Only two trading sessions after it surpassed the 5,100 level the FTSE 100 index took another substantial step forward yesterday, briefly recrossing the 5,200 mark. There were good gains across the market with the second-liners and small caps making useful progress, although they failed to keep pace with the leaders.

Behind the London market's latest surge, which has seen Footsie leap over 250 points, or 5 per cent, over the past three sessions, was Wall Street's closing display on Friday, a good showing by the Hong Kong market, weaker than expected domestic economic news and another burst of takeover speculation.

The latter came in the wake of the merger of two Swiss banks, UBS and Swiss Bank Corporation, which many observers see as evidence of gathering pace in the restructuring of global banking.

UK bank shares have outperformed the equity market over the past two years, partly in the wake of excellent profits performance but also because of the prospect of consolidation. The last big merger, between Lloyds Bank and TSB, is widely seen as a success because of cost savings.

Footsie finished the session 44.5 higher at 5,187.4, while the FTSE 250 rose 29.7 to 4,781.0 and the SmallCap 7.8 to 2.304.3.

London got off to the best possible start, surging through 5,200 as the market priced in Wall Street's big gains on Friday when the Dow Jones Industrial Average finished almost 100 points up despite a large increase in the US non-farm payroll figure.

That report initially wiped out the Dow's early gains, as traders fretted over the possibility that the Federal Reserve's open market committee might sanction a rise in US interest rates when it meets next Tuesday.

Hong Kong added to the good news, moving up almost 2 per cent, although the Seoul stock market was decidedly weak.

The UK economic data were also seen as bullish, with weaker than forecast industrial production, manufacturing output and producer price figures seen as vindicating the decision of the Monetary Policy Committee not to recommend a rise in UK interest rates.

Economists said the data provided further evidence that the recent strength of sterling is restraining economic activity. Mr Paul Mortimer-Lee, at Paribas, said "with the economy set to slow next year, one more hike from the MPC is the most that is likely to be delivered."

In the latest Merrill Lynch survey of UK fund managers, carried out by Gallup, the proportion of investors planning to buy UK equities is matched by an equal number looking to sell.

Turnover was a respectable 708 million shares.