TALK of a big institutional switch from gilts to equities was backed by some exceptionally heavy trading in equities and helped drive UK shares sharply higher yesterday.
The performance of the gilts market tied in with the rumours circulating in the equity market. Gilts were pressured from the outset of trading, with the 10-year bond closing 5 ticks lower and the 20-year issue 11 ticks down on the day.
The switch was said to have been executed via a programme trade, printed just before the equity market closed and encompassing the FTSE 100 and Mid 250 stocks. It included big blocks of stock in BP, BT, BTR, British Gas, GEC, Glaxo, Grand Met, Ladbroke, Lloyds TSB, Lnsmo, Shell, Vodafone and Williams Holdings.
Already stimulated by the buying programme and the overnight surge on Wall Street, the market was given a further boost by a buoyant Wall Street at the opening yesterday, although that market became increasingly turbulent as the session wore on.
The FTSE 100 index once again broke through the 3,700 barrier, but failed to hold above that level, eventually sliding back to close a net 23.4 higher at 3,693.0 - a two-day gain of 48.2. The FTSE Mid 250 delivered another impressive showing, ending 29.7 higher at 4,274.2, only 5.8 off its all-time closing high, recorded on March 7th.
Boosted considerably by the programme trade and continued heavy activity in BAT Industries, BP and Vodafone, turnover in equities reached a healthy 884.1 million shares at the 6pm reading, with Footsie stocks accounting for around 53 per cent of total business. Customer business on Monday was shown as being worth only £1.3 billion, well down on recent daily levels.
Wall Street's near 100-point advance to a new all-time high on Monday saw the UK market off to a flying start.
The only worry for the market came from the debt markets where German bunds gave another unenthusiastic performance, depressed, dealers said, by fears that the German M3 money supply figures, expected this morning, could come in worse than forecast and ruin hopes of more German rate cuts.
At its best, shortly after Wall Street opened, the FTSE 100 reached 3,706.4. At that point the Dow Jones Industrial Average wad up over 40 points. But as the latter fell back, so did London, which settled over 13 points off its best.
Top spot in the FTSE 100 league went to Rexam, the paper and packaging group, whose preliminary results contained no new provisions and drew signs of relief from the market. Oil shares also attracted keen support from overseas, with BP hitting another all-time high and Shell closing only 20p off its peak level.
