London's equity market confounded the bears yesterday, with shares prices bounding ahead across the board in the first trading day since Christmas, reversing the weak trend that had seen the FTSE 100 fall to a three-week low on Christmas Eve.
Although it took some time before the market got into its stride, a background of firm performances by far eastern markets, plus a good Wall Street on Friday night gave British stocks a solid platform to build on.
The market's better feeling was accentuated by a powerful opening performance on Wall Street, where the Dow Jones Industrial Average jumped over 100 points shortly after US markets opened for trading yesterday.
Dealers pointed out, however, that much of the strength in British stocks was deceptive, noting the extremely low levels of genuine trading activity.
"The cash market was being driven by a squeeze in the FTSE future, which allied to the usual takeover stories and end-year press tips, fuelled the rises," said the head dealer at one of the European securities houses.
Turnover of 512.5 million shares was much higher than many had expected at the start of a trading week which will be disrupted by the new year celebrations.
That figure was boosted substantially by massive turnover of 236 million shares in BG "B" shares, which were bought in at 30p a share by the company as part of its £1.3 billion buyback and restructuring programme. Hopes of many more share buybacks, such as the BG move, have also been helping to underpin stock prices.
At the close of the session the FTSE 100 index showed a 98.5 gain at 5,112.4, its best one-day performance since the start of the month, when London stocks were alive with speculation of a spate of takeover bids in the banking sector.
The depth of the market's strong performance was demonstrated by the good showing by the second liners, where the FTSE 250 index jumped 34.1 to 4,732.2 and the FTSE SmallCap 6.8 to 2.296.8.
Wall Street's 19-point rise on Friday, which tended to dampen the fears that some of the big US banks might have taken big losses during the recent turbulence in foreign exchange and global stock markets, was well received and provided a bedrock for far eastern markets.
Market bulls said the merger and acquisitions story would soon spill over into the FTSE 250 stocks and eventually into the FTSE 100 constituents, which would provide further upside impetus to the market.
