Upsurge not seen as new dawn

London appeared to put earlier troubles behind it yesterday as all the main equity indices moved higher. The FTSE 100 Index more than compensated for the previous day's 1.8 per cent slide, hitting 4,917.4 during the day and closing 116.4 up at 4,871.8.

The FTSE 250 jumped 139 to 4,668.1, while the SmallCap lifted 58.3 to 2,315.8.

But just as few strategists genuinely believed that Monday's 550 point fall on the Dow Jones Industrial Average - and the subsequent tremors in Britain - constituted the end of the world, hardly anybody was convinced that yesterday's rally represented a new dawn.

"In the short term, the question is whether Wall Street remains up or slips back down again," said a trader responsible for dealing between the US and UK.

"But you don't see a fall of 550 points in one day and then go straight back to a bull market. End of year forecasts are coming down. People are now starting to talk about 4,200 for the Footsie and 6,000 for the Dow," he said.

On the other hand, there was little reason to drag the UK market lower immediately and every reason to mark it up after the badly mauled Hang Seng Index, which had been the catalyst for the global sell-off, recovered by almost 19 per cent.

Footsie was up 130 points in the first five minutes of trading and held steady ahead of a keenly-awaited speech by Mr Alan Greenspan, the chairman of the US Federal Reserve.

Mr Greenspan's ability to unsettle world markets with his comments has been seen twice in the past 12 months.

And while there was no anticipation that he would return to his theme of "irrational exuberance", a sharp fall in Footsie futures just before he got up to speak reflected some of the general unease in Britain. In the event, he was placatory. He said the economy had been drawing down unused labour resources at an unsustainable pace, spurred by a substantial wealth effect on demand.

But he added that the market's retrenchment of recent days would "tend to damp that impetus, a development that should help to prolong our six-and-a-half year business expansion".

The Dow remained in positive territory until Britain closed for the day. However, it started to sag later and the Footsie future fell back sharply during after-hours trading, as uncertainty crept back in.