Wall Street rally offers Footsie support

The extreme turbulence that swept through London's equity market on Wednesday on the eve of the 13th anniversary of the 1987 stock market crash gave way to a much more positive performance yesterday as Wall Street extended its recovery.

The US rally was triggered by some much-needed positive third quarter earnings reports, particularly from Microsoft, the software giant.

But some slightly disturbing domestic economic news which tended to take some of the shine off the market's good showing.

Economists, reassured on Wednesday by news that the October 5th meeting of the Bank of England's had voted 90 in favour of leaving interest rates on hold, were shocked by news that UK retail sales had risen by 0.6 per cent last month.

A consensus of forecasts had estimated that retail sales would fall 0.2 per cent, because of the blockade of fuel depots during the month.

Richard Jeffrey, economist at Charterhouse Securities, said: "These figures can't be explained away. The latest increase gives a quarter-on-quarter rise of 1.3 per cent and points to rates of growth in consumer demand which are unsustainably strong.

"If the preliminary third quarter gross domestic product data are stronger than expected it will put pressure on the Bank of England's monetary policy committee to respond," he said.

The next meeting of the committee is scheduled for November 8th/9th, less than a week before the outcome of the first meeting of the US Federal Reserve's open market committee following the US Presidential election. The worse than expected September inflation report has triggered fears of a rise in US rates.

Meanwhile the Techmark 100 almost recouped all of the previous day's 146.69 decline, settling a net 112.1 up at 3,327.73, after touching 3,347.50.

It was very much a "new economy" day in the market, with nine of the top ten performers in the FTSE 100 coming from the TMT (technology, media and telecoms) club. It was almost the same for the 250 index where eight out of the top 10 came from the tech stable.

While the TMTs made progress it was mostly old economy stocks that came under pressure, notably the utilities and retailers.

Turnover in equities was an unremarkable 1.62 billion shares.