IF there were lingering worries about the prospects of an interest rate rise in Britain, they did not put off institutional buyers of UK stocks yesterday.
Both the FT-SE 100 and FT-SE SmallCap indices climbed to new intraday and closing highs, responding to a fresh flurry of local and overseas buying.
The only drag on the equity market came from gilts which were a few ticks easier throughout the morning on anxiety about interest rates.
The performance of stocks across the board was all the more impressive, given that sterling continued to gain ground, rising over 1 per cent against a basket of leading currencies and over three pfennigs, or 1.1 per cent, against the deutschmark.
The Bank of England left its money market dealing rates unchanged, signalling no alteration as yet in official interest rates after the latest meeting between Mr Eddie George, governor of the Bank of England, and Mr Kenneth Clarke, the Chancellor of the Exchequer. Nor was there any change from the US where the Federal Reserve Open Market Committee finished its two day meeting to debate US monetary policy.
The FT-SE 100 index closed an active trading session up 20.6 at a new closing peak of 4,281.5 having moved to an intraday record of 4,2,86.9 in mid morning.
The FT-SE SmallCap, meanwhile, was a further 4.9 ahead at a peak 2,319.0 after an intraday record of 2,319.1. The FT-SE 250 joined in the market's upsurge, shrugging off its recent bout of under performance and moving up 8.2 to 4,583.9. But it remained about 32 points away from its closing and intraday highs, recorded on January 23rd.
Sterling's strength was one factor behind the handful of losers in the FT-SE 100, notably two of the market's big pharmaceutical stocks, Zeneca and SmithKline, whose shares have both been inflated by takeover speculation. They were additionally weakened by news that Roche of Switzerland, long seen as a potential bidder for either, had made an acquisition in the US, making a blockbusting bid less likely in the short term.
There was help for London too from Wall Street, where the Dow Jones Industrial Average opened sharply higher after news of the proposed merger of Morgan Stanley and Dean Witter, which will create the biggest investment bank/stockbroker in the world. Up 27 points overnight, the Dow was up 30 points not long after the opening.
Turnover at 6 p.m. yesterday was 800 million shares. Customer business on Tuesday, excluding Crest transactions, was worth £666.3 million sterling.
