Wobbly market recovers to bounce back by final bell

London's stock market regained its balance yesterday, recovering well from Monday's wobble and responding to good news on the domestic inflation front and positive stories in the telecommunications sector. But closing gains, which stretched right across the board, were hard won as a twitchy last hour or so of trading saw the FTSE 100 index relinquish all of its earlier gains before picking up again to finish modestly higher.

The late dose of nervousness came as a number of Stock Exchange staff were taken to hospital for tests amid an anthrax scare and as Wall Street went into reverse after a bullish start to the US trading session, ahead of crucial third quarter numbers from Intel and IBM, among others.

Monday's market sell-off had been induced mostly by a bout of nerves triggered by the anthrax scares in the US and the continuing air strikes against terrorist targets in Afghanistan, coupled with concerns that this week's extensive list of US companies reporting third quarter results would unsettle Wall Street. Although still preoccupied by the terror scares, Wall Street did its best to get London and other European markets off to a good start.

With sentiment in London already lifted by the US market, there was further encouragement for the FTSE 100 with the not totally unexpected news that BT and AT&T of the US had brought the curtain down on their Concert joint venture. BT shares raced higher only to fall away later in the session.

The September UK inflation report showed underlying inflation has fallen below the government's 2.5 per cent target to hit 2.3 per cent, year-on-year. That news encouraged those hoping for yet another reduction in domestic interest rates after the next meeting of the Bank of England's monetary policy committee, scheduled for November 7-8. Commenting on the data, Jonathan Loynes, chief UK economist at Capital Economics, said: "The numbers are even better than they look, bringing evidence that the weakening of cost pressures seen in recent months is having an impact on prices at the retail level.

"With this process likely to continue in coming months, the numbers clearly open the way for further cuts in interest rates." Turnover in equities reached 2.2 billion by the 6 p.m. count.