Worries that Wednesday's modest setback in the leaders could have been the first sign of another substantial market downturn were allayed yesterday. The prospect of another cut in British interest rates, plus some generally encouraging statements from leading FTSE 100 constituents and more takeover news, helped the market's front-line stocks recoup around half of the previous session's losses. Even more encouraging, as far as dealers and investors were concerned, was the market's ability to resist a weak opening performance by Wall Street.
The Dow Jones Industrial Average, burdened by worrying third-quarter reports from a long list of US blue chips such as Shell Oil, Chevron, Sears Roebuck, Dow Chemical and Boeing, fell more than 80 points not long after the opening bell.
But dealers had relatively good news from the Far East to look at. In Tokyo the Nikkei rose for the fifth session in a row, although in Hong Kong the Hang Seng closed a whisker down despite earlier modest gains.
But the FTSE 100 index, although closing well below its session high, 5,259.4, up 52.9, never looked like losing its way. It ended 23.3 ahead at 5,229.9. And the mid-cap and small-cap areas of the market made further good progress, adding to the general air of confidence encompassing the market.
The FTSE 250 index posted its tenth straight winning performance, finishing 17.9 up at 4,656.0, after a session high of 4,658.0, while the FTSE SmallCap index registered its eighth consecutive rise, moving up 2.3 to 1,942.6.
One worrying feature, dealers noted, was the sharp contraction in volume and volatility yesterday in the FTSE future, where turnover was said to have fallen to its lowest daily level since the market began its big slide at the end of July.
"The big slowdown in business sent signals to some that the chase for value in this market is now drawing to a close," said one trader.
Equity market strategists still adopted a bullish tone on the market, however. Commenting on the market's recent performance, the British equity strategy team at Credit Suisse First Boston (CSFB) said: "For now, technical indicators offer little insight into whether the recovery in the FTSE 100 marks a new upswing, or simply a rally in a downtrend."
But CSFB insisted that the evidence at a stock level "is encouraging with the market regaining a fairly clear shape, after the initial rebound. Decisive sector leadership is a key condition to the rally being sustained."
Reuters was Footsie's best performer after a third-quarter update. It jumped a massive 10 per cent, up 47 1/2p to 517 1/2p after announcing a healthy rise in third-quarter revenues.
It was followed by Legal & General which said like-for-like new business in Britain had risen by nearly a third. This was a better performance than some of its rivals and it pushed the group up 35p to 666p.
Chemicals company ICI was up 7 1/2p to 506 1/2p even though it saw its profits before tax in the third quarter tumble to £70 million from £132 million.
Arcadia, which owns top high street fashion names including Burton and Top Shop, saw its annual profits rise by nearly a fifth. But shares fell 7 1/2p to 272 1/2p after it admitted current trading conditions were "challenging". Body Shop International, saw its shares fall
nearly 10 per cent after it posted a significant fall in profits and noted the weaker retail climate in Britain. The group, 7 1/2p lower at 77 1/2p, promised to announce a major shake-up within the next six months.
Meanwhile CGU, created out of the merger of Commercial Union and General Accident, said it was to shut seven branches as the first step of a restructuring programme which will see 3,000 jobs go. CGU lost 19 1/2p to 878p.
Turnover in equities was a disappointing 875 million shares, the first time it has dropped below one billion in seven trading sessions.
