Another intense burst of take-over activity mixed in with Wall Street's impressive rally on Monday evening brought some much needed respite to a London stock market suffering from acute interest-rate anxieties. But the market had to endure a mid-session struggle before it emerged in positive territory.
Its slide into the red was prompted by expectations of an uncertain opening on Wall Street subsequently proved correct and a flurry of selling pressure right across the board in the banking sector and especially NatWest and its two predators, Bank of Scotland and Royal Bank of Scotland.
The FTSE-100 finished a rather frantic session a net 22.4 higher on balance, having swung round from an early 98.6 gain to post a 36.6 decline at its worst.
That decline accompanied a 32-point slide by the Dow Jones Industrial Average.
While the 100 index managed to claw its way back into positive ground, the FTSE-250 succumbed to widespread weakness among many of the consumer areas. These included hotels, where Thistle and Millennium and Copthorne were badly mauled, and retail stocks, such as Next, all of which fell between 5 and 7 per cent.
The 250 settled a net 17.0 lower at 6,164.0, only 0.7 above its session low, having been up 45.8 at best.
The FTSE SmallCap index, meanwhile, finished a respectable 7.1 firmer at 3,167.7, having touched a session best of 3,175.2.
Dealers said market opinion was split. Optimists take the view that the market will be driven to new high ground by the stream of take-overs and mergers. Pessimists maintain that markets tend to struggle in a cycle of rising interest rates.
That debate intensified yesterday ahead of the first of three crucial interest-rate decisions to be made in the next seven days.
Later today the US Federal Reserve's open market committee will announce the outcome of its two-day deliberations on monetary policy. The majority of economists expect the Fed to lift rates by 25 basis points although many insist a 50-basis-points increase cannot be ruled out.
Tomorrow brings the second crucial decision, when the governing council of the European Central Bank makes its announcement on euro-zone rates, to be followed on February 10th by the Bank of England's monetary policy committee's decision.
Some took the view that almost all of the expected bad news on interest rates has mostly been priced into the market and that a rally would follow once the increases were announced.
