Market Report - London

A turbulent week in London's equity market drew to a close with share prices staging a good rally, halting a run of three straight sessions of heavy losses.

Dealers attributed the rally to a bout of bear closing ahead of the weekend, pointing out that Asian markets, the source of most of the problems afflicting London stocks earlier in the week, remained under pressure.

At the finish of a session of relatively light trading activity, the FTSE 100 index posted a 9.3 gain at 5,045.2, reducing the fall on the week to 97.7 or 1.9 per cent.

Just as the second and third-line stocks did not fully mirror the big losses in the leaders earlier in the week, so they underperformed the latter yesterday. The FTSE 250 was 4.1 firmer at 4,757.9, leaving that measure 6.6 higher over the five-day period, while the FTSE SmallCap edged up 1.8 to 2,300.6, up 4.1 on the week.

"The Asian market weakness hasn't gone away but it does seem to be causing fewer problems than before," said one trader.

He said the bear closing was accompanied by small flurries of support from institutions all too aware of the market's ability to stage an end-year run.

Such a run would almost certainly be triggered by any substantial takeover or merger activity in UK stocks. The financial sectors of the market have been alive with speculation that a substantial restructuring of the UK banking arena is not far away.

The proposed merger of UBS and SBC, revealed last Monday, led to intense speculation that similar mergers would follow in the UK, France and Germany.