Far from witnessing a market meltdown in the wake of the reopening of Wall Street after the dreadful events that took place in New York and Washington last Tuesday, London's equity market, or at least the blue chips, put on an impressive display of strength yesterday.

Even more impressive was the fact that the big gain in the FTSE 100 took place against a steep, but not entirely unexpected, slide in the various US stock market indices.

Behind the FTSE 100's display were suspicions that some of the demand for the leading UK stocks was a reflection of more closing of short positions by hedge funds.

Last week there were strong hints that some of the life assurance companies called in stock previously lent to hedge funds, helping the FTSE 100 rebound strongly after Tuesday's 287-points fall.

And the US Federal Reserve played its part in bolstering global market sentiment by lowering US interest rates by another 50 basis points, the eighth reduction so far this year.

The European Central Bank chopped its interest rates by 50 basis points, at 4.30 p.m. London time, quickly followed by the Swiss National Bank, prompting intense speculation that the Bank of England would be the next to chop rates, possibly as early as this morning.

Balanced against the big rally in the FTSE 100, however, there was more pain for the FTSE 250 and SmallCap indices.

And the Techmark 100 was easier again and finished at another record closing low, having hit an all-time intraday low earlier in the session. The 250 index, on the other hand, had its lowest closing level since March 1999, having touched 5,327.8 at one stage. The FTSE SmallCap also fell to its lowest point since March 1999. The Techmark 100 settled 7.95 down at 1,242.89.

The Dow Jones Industrial Average fell away sharply, after an initial bout of resistance triggered in part by the Fed's move to cut US interest rates and a modest bout of domestic support buying.

At one point it fell over 600 points and dropped below the 9,000 level before rallying, while the Nasdaq posted a three-figure decline then picked up.