London's equity market had a more confident feel for much of yesterday's session, despite the imminence of the Bank of England's decision on interest rates, to be announced at noon today.
The FTSE 100 index managed to hold above the 6,000 level throughout the morning but lost its way in the early afternoon before rallying to post a sixth straight winning performance.
Its late rise came as Wall Street began to move higher, pushing through the 9,100 level on the Dow Jones Industrial Average. The Dow was up more than 50 points shortly after London closed.
The impressive closing display was not confined to the front-line stocks. The second-liners, represented by the FTSE 250 index, were equally buoyant, with the index also extending its sequence of consecutive gains to a sixth day.
The 250 gained 18.7 to 5,622.0, just short of a session high of 5,624.4 and ever closer to its record closing high of 5,966.6.
The underperformance of the smaller stocks, however, continued into a third day. The FTSE SmallCap index settled a further 5.4 off at 2,589.5.
Some market-makers reserved judgment on the day's performance. "We still have to negotiate the monetary policy committee's decision, which could turn the market upside down," said one trader. However, he conceded that there was more cash coming into the stock market from pension funds and insurance companies, mostly via programme trades, which take some time to unwind in current market conditions.
Sentiment was given an additional lift from better-than-expected earnings and trading updates issued by two of the market's leading consumer-related stocks, Dixons, Britain's biggest retailer of electrical goods, and Scottish & Newcastle, the brewing, retail and leisure company.
There was also a resurgence of takeover speculation. One of the driving forces behind the market in recent months, the bid buzz has not been heard for some weeks, only to revive yesterday in the drugs sector, where SmithKline Beecham shares raced higher on speculation of a possible merger with Merck of the US. Some aggressive trading in SmithKline stock saw the shares the heaviest traded in the FTSE 100 list of constituents.
The interest rate rise talk dampened down yesterday, with some dealers adopting the view that the market had already priced in a rate rise and would therefore extend its upside performance if there was no move to lift rates. However, after six straight gains, other traders said London would need a big influx of cash to drive it forward again.
