Market rallies as terrorist fears wane and Kabul falls

The growing realisation that Monday afternoon's air crash in New York was unlikely to have been the result of terrorist activity, plus news of increasing success by anti-Taliban forces in Afghanistan, inspired a strong rally in London's equity market yesterday.

News that it was more likely that the air crash was mechanically inspired triggered a substantial recovery on Wall Street on Monday night, when the Dow Jones Industrial Average finished the session a net 53 points off, having been down almost 200 at its worst, and saw London market on the way up from the outset.

The Dow accelerated again yesterday, climbing 160 around the London close. The Nasdaq Composite was up 48 at the same time. Already invigorated by the US pointers, London was given fresh momentum from last month's retail prices data, which showed inflation very much under control and likely to fall further. By the finish of the session the FTSE 100 ended the day a net 130.9, or 2.5 per cent, higher at 5,277.1. Regaining 5,200 was seen as a big plus, although there was disappointment the index failed to penetrate 5,286 seen as the next obstacle to further gains.

Once again, the star performer among the main indices was the Techmark 100, which shot up 75.25, or 5.1 per cent to 1,526.58.

On the inflation data, Mr Jonathan Loynes, chief UK economist at Capital Economics, said; "Although RPIX retail price index held steady in October . . . it is set to fall off a cliff in November. The key reason for this is the influence of petrol prices, which have fallen sharply in the wake of the recent falls in oil prices. RPIX should fall at least to 2 per cent in November and a figure as low as 1.8 per cent is possible."

The winners in the main indices were heavily loaded with TMT stocks.

Vodafone did not feature in the FTSE 100 top 20 performers but nevertheless accounted for getting on for 20 points of FTSE upside in the wake of the warmly-received interim numbers and the encouraging statement.

Marconi, the telecoms equipment manufacturer, delivered the expected dire results, accompanied by substantial turnover in Marconi shares.

Turnover in equities reached 2.45 billion shares, boosted by massive business in Vodafone and Marconi and talk of programme trade business.