PERCEIVED good news on the domestic economy, the usual daily dose of takeover speculation and a very strong performance by gilts combined to drive share prices sharply higher yesterday.
Such was the mood in London that the FTSE 100 index skipped through the 3,700 level with relative ease, closing a net 18.7 higher at 3,71 8.4. The Footsie has been burdened in recent sessions by worries about the impact on the public sector borrowing requirement and the balance of payments of the BSE scare.
It has also been restrained, dealers said, by a substantial sell side programme, lasting for three days, part of a Europe wide trade which ended last Friday.
In a reversal of the trend of most of this year, the FTSE Mid250 index had to cope with a much more difficult trading session. It finished the day 0.2 higher at 4,326.9, having been in negative ground for much of the session.
It was the marked strength of gilts which provided the real driving force for equities. A late rally in US treasury bonds on Friday evening, plus a strong showing by German bunds at the outset, saw gilts make good progress.
The British purchasing managers' survey for March was the source of much of the market's enthusiasm, indicating a slowing economy and minimal inflationary pressures and encouraging the feeling around the markets that the next move in British interest rates may be down.
The Chancellor of the Exchequer, Mr Kenneth Clarke, is scheduled to meet Mr Eddie George, governor of the Bank of England, tomorrow to discuss monetary policy. The chances of a rate cut in the wake of the meeting were said to be minimal but dealers said the day's news would be seen as bullish for rate cuts in the future.
The BT and Cable & Wireless merger story remained the market's main talking point and the City's enthusiasm about a deal between the two telecoms giants drive both share prices sharply higher, in C&W's case to equal the stock's all time peak.
And activity in BT and C&W provided over 6 per cent of the market's overall turnover, which reached 662.1 million shares at 6 p.m. Customer activity on Friday topped £2 billion for the third successive trading session, coming out at £2.09 billion, heavily boosted by the Morgan Stanley trading programme.
