Wall Street brings FTSE in its wake
A DETERMINED rally on Wall Street, coupled with excellent corporate news and fresh hopes of developing takeover activity saw London stocks make good progress.
The FTSE 100 index built on early strength, gradually gathering momentum and eventually closing an active session at the day's high, 3,738.2, for a net gain of 22.3.
Over the past two sessions the index has risen 34 points, leaving it only 43.1 below its record closing high and 53.4 below its intraday peak.
There was much more enthusiasm around the trading desks for the second liners, which were given a big lift by the prospect of more bid activity in the pipeline. The FTSE Mid-250 index closed comfortably above the 4,200 level, ending 16.8 up at 4,215.5.
Casino/hotels stocks, such as Stakis and London Clubs, were among the main upside performers in the second line stocks, following the consultative document on the British gambling industry, which indicated a much more liberal attitude to the sector.
Earlier, the stock market had looked uncertain in the wake of Tuesday's slide on Wall Street, where the Dow Jones fell over 50 points before stabilising and closing a net 15 points up, despite slightly conflicting evidence on US economic trends.
The downbeat showing by Wall Street and renewed uncertainty in the US bond market ensured a cautious opening by the London market, which was also wary of the outcome of the auction of £3 billion sterling in gilts.
A good run by gilts in the early part of the day, gave some support to equities, as did the latest firm showing by bunds, helped by lingering hopes that today's Bundesbank Council meeting might bring a cut in German rates.
Gilts quickly ran out of steam after the result of the latest auction, which was covered only 1.48 times. Disappointment at the cover saw gilts give up initial gains of half a point, before embarking on a late upturn which saw the 10 year gilt some 10 ticks better at the close.
Opening some three points higher, Footsie picked up speed during the session and was looking well set by the end of the day.
"The market does feel as if it is going higher in the short term," said one senior dealer who pointed to the recovery by Wall Street and the much better feeling in bond markets.
Bank shares continued to feature prominently in the FTSE 100 best performers list. Standard Chartered delivered a stunning showing, with the shares up over 6 per cent on the back of record profit figures. The shares have long been viewed as one of the Footsie's premier takeover targets.
Lasmo, another takeover target and due to announce preliminary numbers this morning, also out paced the index, as did British Steel, where speculation about a share buy back increased.
Market turnover continued to expand, reaching a healthy 785 million shares at the 6 p.m. reading. Customer business on Tuesday was worth £1.9 billion.