A much-welcomed rally in the Japanese yen, plus supportive performances from Tokyo and Hong Kong, provided the ammunition for a sparkling showing by London's equity market as the third quarter got under way.
"We were desperate to leave the second quarter behind; it was a dismal time for the markets, what with the interest rate hike here and the Asian crisis boiling up again," said one equity salesman. He said, however, that yesterday's exceptional gains in the leaders and second-liners occurred in relatively thin trading.
Turnover in the equity market approached the 900 million mark, eventually finishing at 880 million shares, split down the middle between the FTSE 100 and other stocks.
The FTSE 100 index, which lost over 100 points in the second quarter, settled comfortably above the 5,900 level, closing up 87.4 at 5,919.9. At its best, Footsie was 114.5 points ahead at 5,947.
And there were strong gains across the mid-cap stocks with the FTSE 250 climbing 31.1 to 5,534.9 in the wake of another upward spiral in the price of Colt Telecom, one of the market's current favourites.
It was also inspired by the follow-through buying of takeover stock Thorn and a big gain in Sedgwick, the insurance broker, one of the stock market's longest-running takeover stories. A lone dismal showing in the 250 index came from Devro, the sausage skin maker, whose shares plummeted almost 30 per cent.
But the pain in the smaller stocks continued. The FTSE SmallCap index had to contend with another spate of profit warnings which saw no fewer than three smallcaps tell their shareholders of problems ahead. Looking into the prospects for the third quarter, Mr Paul O'Connor at Credit Suisse First Boston said: "Equity valuations relative to bonds are cheap and liquidity conditions are very strong."
It was not only the performance of Asian stock markets that encouraged London's buoyant showing. Wall Street kicked off its trading session in very good heart, with the Dow Jones Industrial Average recovering strongly at the start of US trading yesterday.
On Tuesday, the Dow had looked nervous, dropping 47 points as the Federal Reserve open markets committee meeting got under way.
Shortly after the bell rang to signal the beginning of the day's activity in New York the Dow was racing ahead; it was up more than 60 points an hour after London dealers closed their trading books for the day, moving back above the 9,000 mark in the process.
Wall Street's surge came in the wake of a relatively weak June National Association of Purchasing Managers' index which came in at 49.6, against a May figure of 51.4 and a consensus figure of 51.
