INCREASING optimism that the US Federal Reserve would refrain from increasing interest rates following its open market committee meeting helped propel British stocks sharply higher yesterday, driving the FT-SE 100 to all time intra-day and closing highs.
Adding to the bullish atmosphere in London was the expectation that the Bundesbank would approve a reduction in Germany's repo rate after its regular council meeting tomorrow, in the wake of reassuring M3 money supply figures.
London was additionally helped along by mildly encouraging British economic data, showing slightly better than expected M4 money supply figures for July.
Those numbers gave a measure of support to the gilts market, which remained steady throughout the session, before easing during the afternoon following details of the next gilts auction, scheduled for next Wednesday £2.5 billion- worth of 7.5 per cent 10 year stock.
At the close of a session which saw a relatively modest, but nevertheless welcome, increase in turnover, the FT-SE 100 index finished 19.5 up at a record closing high of 3,883.2. At its best, shortly before Wall Street opened for trading, Footsie achieved an all time intra day record of 3,884.8.
The strength of the leaders spilled over into the second liners, where the FT-SE Mid-250 index ran up 17.0 to 4,385.3. The Mid-250 index is still some way off its all time intra day and closing highs, 4,568.7 and 4,568.6 respectively, which were attained on April 26th this year.
There was more good news for London and other international markets from Wall Street, which looked in relatively good shape at the opening and which was around 10 points ahead as the London trading session closed.
Dealers were by no means euphoric as share prices spiralled upwards to their new highs. A senior dealer at one of the top European owned securities houses said prices had been pushed ahead by market makers caught short of stock. He worried that the market could be on the brink of another leap forward.
"Genuine customer business is on the thin side and we've been lifted by the short covering and by the future which climbed over the 3,900 barrier at one point," he said. He warned, however, that the market was susceptible to bouts of profit taking in the short term, after its recent strong run.
Railtrack was one of the biggest risers and most heavily traded stocks in Footsie with rumours of a US stakebuilder helping to push the shares ahead.
