UK shares were firmly back on the upward trail yesterday, with the big investing institutions tending to concentrate on the many bullish factors in the market rather than continuing turmoil in the Far East.
There were still plenty of casualties in the Asian markets, although Seoul, the source of the most recent concerns, rallied sharply to finish 7 per cent up on the day. Hong Kong was described as "worryingly weak" by one London trader.
On the plus side, London remained alive with speculation that the recent spate of takeovers and mergers, most of which have involved small companies, will soon encompass the FTSE 100 with the financial sectors still viewed as the most likely battleground for a series of bids.
Adding to the general mood of optimism that returned to London yesterday were an unexpected interest rate reduction in Spain, a growing feeling that the US Federal Reserve's open market committee will leave US rates on hold for the time being, and a downturn in sterling.
The latter fell sharply against the dollar and the deutschmark, while the Bank of England's sterling Exchange Rate index dipped below 103 for the first time since early November, finishing at 102.4, down 1.2.
Sterling's decline gave a boost to the big exporters, as well as the heavily weighted oil and pharmaceutical sectors which are big beneficiaries. As well as the bid stories, dealers continued to point to the likelihood of many more share buyback proposals, and the high levels of cash held by the institutions, as positive pointers for the market.
The FTSE 100 shrugged off a midday bout of profit-taking and accelerated strongly to finish the day a net 76.6 higher at 5,121.8. The lunchtime nerves were quickly dispelled as Wall Street came in on a firm note, later to fall back through the 7,900 level.
The second-tier stocks delivered a rather more sedate performance, the FTSE 250 finishing the session 5.1 ahead at 4,763.0. The FTSE SmallCap moved against the overall trend, however, slipping back below 2,300 and closing 0.7 lower on balance at 2,299.9.
Turnover in the market was a disappointment, however, eventually reaching a lowly 599.1m shares at the 6 p.m. cut-off point.
Barclays was the star turn in a banking sector expected to provide the market with its next mega bid. Talk persisted that Barclays has NatWest in its sights, while many believe Abbey National or the Prudential would also attract predatory interest.
