Traders returned from their Easter breaks to find the British market was still a slave to the gyrations of Wall Street. A sharp fall in US technology shares on Monday, when London was closed, meant the City was always likely to start on the back foot.
But once it became clear that Wall Street would stage an opening rally yesterday, the tide turned for British shares.
The FTSE 100 index closed 41.8 higher at 6,283.0, having been as high as 6,313.8 and as low as 6,155.7 during the day. That was its fourth consecutive gain and left Footsie almost 300 points above its April 17th close.
The remarkable thing was how well British shares stood up to two distinctly negative factors. First, the market's biggest stock, Vodafone AirTouch, fell heavily.
Traders cited selling by US investors who need to raise cash to invest in the forthcoming flotation of AT&T's wireless unit. Vodafone's 7.2 per cent drop equated to around 70 points off the FTSE 100.
Second, the pound reached a new peak against the euro. While this was due to euro weakness rather than pound strength, it still makes life difficult for British exporters. Against the deutschmark, the pound yesterday reached a peak of DM3.33 compared with the DM2.20 or so it fell to in the aftermath of the pound's departure from the Exchange Rate Mechanism.
Although the pound has not been as strong against the dollar as against the euro, on a trade-weighted basis, last night's close of 111.4 represented its highest level since December 1985. Despite those problems, investors seem to have recovered a bit of their nerve after the gyrations earlier in the month. There were modest gains for the FTSE 250, up 12.6 at 6,130.5, and the SmallCap, 9.4 higher at 3,128.1.
Technology stocks were distinctly mixed after Nasdaq's fall on Monday and early rally yesterday. Psion was the best performing stock in the FTSE 100 but there were big falls for Durlacher and QXL.com in the FTSE 250.
The Techmark 100 index ended 16.72 down at 3,523.27 much better than its low for the day of 3,449.38. Oil, banking and pharmaceutical stocks appeared to benefit from modest switching out of the tech sector. But media stocks, part of the recently fashionable TMT group, performed well, thanks to bid speculation concerning Emap.
Volatility this week, however, may be constrained by the forthcoming May day holiday weekend. Turnover yesterday was 1.6 billion shares by the 6 p.m. count, a respectable level given the holiday period. Vodafone was again the busiest individual stock but there was also heavy activity in Tesco and BP Amoco.
