The return of confidence in London's equity market gathered momentum yesterday, rounding off a week of exceptional gains across most areas.
Once again, it was the prospect of further cuts in domestic interest rates that was said to have been the main driving force in the market, a view helped by the downgrade of third-quarter gross domestic product figures yesterday.
Those interest rate expectations were mixed in with the ever-present talk of more takeover/merger activity.
Traders reported evidence of substantial overseas buying, particularly from Japan.
After a session of increasingly frantic chasing of the front-line stocks, the FTSE 100 index finished comfortably clear of the 5,700 level, only a day after recrossing 5,500.
Footsie closed 111.3 higher at 5,717.5, taking the gain for the week to 254.3 or 4.6 per cent. That increase has seen the Footsie rally from its October 5th lowest closing point of the year by 1,068 points, or 23 per cent.
The junior FTSE indices, the FTSE 250 and SmallCap, were again left gasping in the wake of the 100 index.
Market-makers pointed out that it has mostly been the second- and third-line stocks that have borne the brunt of the constant stream of profit warnings and disappointing trading statements.
Nevertheless, the FTSE 250 index still managed a strong performance, closing another 41.5 firmer at 4,843.0.
The FTSE SmallCap lagged the 250 with its 4.4 gain yesterday to 2,053.7.
The head of trading at one big European investment bank said the London market's surge was a reflection of the positive outlook for UK interest rates in the short term. He also said London was being driven higher by an influx of domestic and overseas money ahead of European economic and monetary union on January 1st. "Global markets will effectively close down as EMU looms up and the big global institutions do not want to be short of the markets ahead of that; so they are pumping the money in now," he said.
