A BIG bounce in the financial stocks, plus the knock on effect of strong US equity and bond markets, saw shares in London make rapid progress yesterday.
The stronger tone in US treasury bonds reversed an early slightly easier trend in gilts, which also contributed to the much better feeling around the British equity market.
The FTSE 100 share index comfortably regained the 3,650 level surrendered last Friday, and closed in very good heart. Second liners, meanwhile, gave another good performance, with the FTSE Mid-250 index finishing the day up 17.3 at 4,244.5.
A fresh burst of actual and rumoured takeover news added to the general air of optimism, as did a long list of generally encouraging corporate trading statements.
Dealers said they expected London to continue to gain ground as long as the US bond market held steady. "With Wall Street in good. shape, we should be fine " said the head trader at one of the securities houses.
He warned, however, that there is plenty of room for upsets in the market this week from a long list of economic data due from the US, Britain, France and Germany.
On the domestic front, tomorrow brings retail sales numbers and M4 money supply numbers, while February's inflation figures are due on Thursday. German M3 money supply figures are scheduled for release tomorrow; European markets reacted extremely nervously late last week to rumours that the figures could be much worse than previously thought.
London made a bright start to the day, with an initial two point gain in Footsie equating to a rise of nearly 14, after allowing for almost 12 points of ex dividend among the constituents.
But a mini wave of bid speculation and news, plus the boost from Wall Street, saw the index move up a gear and hit a session peak of 3,670.2, up 25.4, before coming off the top at the close.
The Dow Jones Industrial Average galloped ahead from the outset, rising over 40 points, and had posted a 54 point improvement at 6 p.m. London time.
Banks and insurances provided eight out of the top 10 Footsie performers, with dealers pointing out that the banks had underperformed the market by 6 per cent last week and were due a rally. Lloyds TSB, badly hit by worries about the mortgage price war, climbed over 4 per cent, while the composite insurances drew strength from more settled bond markets.
The takeover/merger speculation in Cable & Wireless boiled up again, but cooled in mid session after the group denied that any further talks had taken place.
The FTSE Mid 250 was given a lift by a 33 per cent surge in Unitech, as the market braced itself for a bid of around 650p to 670p a share from Siebe.
BAT Industries was Footsie's heaviest traded stock and endured a choppy session after the group hosted a meeting of analysts and institutional shareholders.
Turnover in equities at the 6 p.m. reading was 576.1 million shares. The value of customer business on Friday was put at £1.7 billion sterling.
