A big day for data left the London equity market wallowing yesterday. Punch-drunk from a heavy battering inspired by a tumbling yen and sliding British business confidence the FTSE 100 index staggered around with little obvious inspiration yesterday.
Footsie opened up 38 points and hit its high of the day with a rise of 61 to just under 5,500 a couple of minutes later. That followed Tuesday's 112-point fall on the Dow Jones Industrial Average.
But the index's movements seemed to bear little relation to the flow of news. Footsie suffered an early morning reversal, hitting a low for the day of 5,403.6, down 29.2, despite the latest average earnings figures showing that growth was down to 5 per cent from 5.4 per cent.
Recovery started after a mixed quarterly inflation report from the Bank of England. The bank admitted its projection for the short-term course of inflation was higher than in its May report, but it was alive to the threat of recession.
The closing Footsie gain of 29.4 at 5,462.2 was both a "dead cat bounce" according to the bears and "a sign of healthy resilience" if you were one of the bulls.
Mr Richard Jeffrey, the Charterhouse strategist, said: "The performance of the market, against a reasonably favourable European backdrop, has been very uncertain and London is showing the potential for further weakness."
He said wage inflation would remain a problem because of the high level of vacancies. However, one senior sales trader said Tuesday's fall was not backed by genuine selling pressure and yesterday's trading gave cause for hope.
"I am not saying we have seen the worst of it but we are not going down in a straight line and the resistance levels have proved themselves. We bounced decisively off 5,400," he said.
He added that the evidence of directors buying their own company shares, cited by the latest Merrill Lynch survey, was an encouraging signal. And he said several fund managers had reacted to the yield ratio - the relationship between bond and equity dividend yields and a key pointer to asset allocation decisions. The ratio fell to its lowest level for six years because recent rises in gilt prices had coincided with sharp falls in equities.
Elsewhere in the market, the FTSE 250 index rose 11.4 to 5.213.7 but the SmallCap was still out of favour. It shed 8.0 to 2,359.7.
Turnover at 6 p.m. reached 833.2 million shares with activity firmly in favour of the FTSE 100 because of continuing heavy trade in BP and Shell Transport following Tuesday's news that BP is taking over Amoco. Blue-chip stocks accounted for 60 per cent of the day's trade.
