SHARES in London rose and fell in tune with the mood on Wall Street yesterday and even some slightly discouraging domestic news failed to stop the FTSE 100 index recording its eleventh consecutive rise.
Monday's 123-point jump in the Dow Jones Industrial Average gave the British stock market a flying start. Some of the market's bigger stocks were also lifted by the renewal of takeover speculation following the announcement of the merger between Guinness and GrandMet. Pharmaceuticals benefited from bid talk in the morning, while banks made the running in the afternoon.
Footsie set its sights on a new target of 4,700 and passed it with ease. At its peak, the leading index had climbed by 50.7 points to a new all-time intra-day record of 4,720.3.
The mood changed at 11.30 am., however, with the release of the Bank of England's quarterly report on inflation. Some encouraging comments from Mr Eddie George, the bank governor, had helped British shares on Monday.
But the report highlighted the need for further interest rate rises if the government was to meet its inflation target in two years' time. Shares lost around a third of their gains over lunch.
The second hit came in the late afternoon when the Dow Jones Industrial Average, which started the session slightly firmer, lost ground on Treasury bond weakness and was around 22 points lower at the London close.
That took the shine off Footsie's gains but the market still ended 21.4 points ahead at yet another all-time high. Smaller stocks once again failed to keep pace. The FTSE Mid-250 edged up 6.6 to 4,533.0, while the SmallCap gained only 3.8 to 2,317.8.
Against the recent trend, the gilt market was of little help to equities.
Many analysts argue that the fall in gilt yields over the last week gives support to the valuations of the equity market, despite its recent strong rise. Shares do not look expensive, compared with the last 10 years at least, on a yield, ratio basis (by which gilt yields are compared with the dividend yield) or on an earnings yield basis.
Volume yesterday was 950.2 million shares at the 6 p.m. count, of which 51.7 per cent was in non-Footsie stocks.
