THE prospect of another series of global interest rate cuts helped to propel the FTSE 100 index to an all time closing high yesterday.
Although there was no hard and fast news when London closed for business, the market was looking for a reduction of at least 25 basis points in the US Federal Funds rate. And there were hopes that a cut by the Federal Reserve could encourage the Bundesbank to reduce Germany's discount rate by at least the same amount.
A move by the Bundesbank to lower its repo rate by 15 basis points, the third reduction in as many weeks by the German central bank, was taken very positively by international stock markets.
At the close of one of the busiest trading sessions for many weeks, the FTSE 100 settled at an all time closing peak of 3,759.3, up 24.0 on the day, while the FTSE Mid 250 index gave another strong performance, adding 29.3 at 4,125.0.
Dealers made the point that the FTSE Mid 250, which has underperformed the FTSE 100 over the past 18 months, is now within striking distance of its record peak, 4,152.8, which it hit on February 3rd, 1994.
It was by no means plain sailing for British equities, however. Wall Street's advance on Tuesday evening, which took the Dow Jones Industrial Average up 76 points to yet another all time high, saw London's market makers hoist their opening prices for the leading British stocks.
Consequently, the Footsie started the day 22.2 higher, but then encountered various pockets of resistance, which began to erode the market's confidence.
News that the Elf Enterprise joint venture had sold its 12.9 per cent stake in Enterprise Oil, some 67.7 million shares, to a trio of brokers, who quickly placed the stock with a variety of institutions, helped to drain the market's liquidity.
There was also some slight disappointment in the market with the outcome of the £3 billion sterling auction of gilts, although some dealers said that the cover of almost two times was better than had been expected.
Gilts had made limited progress during the early part of the morning, posting gains of between five and seven ticks, but ran out of steam after the auction news was published.
Initial indications from Wall Street added to the gloom in London, and the Footsie came back to register its lowest level of the day, 3,739.2, shortly after US markets opened. The Dow posted an early 20 point fall but then begun to claw its way back, eventually moving into positive territory as London closed and imparting late strength to the FTSE 100.
BSkyB topped the Footsie performance league, attracting keen interest ahead of next Tuesday's interim results and amid hints that Carrefour, the French retailing group, may be considering the sale of its stake in the satellite television company to Sony, the Japanese electronics giant.
