The nervousness surrounding London's stock market earlier this week was all but washed away as investors responded enthusiastically to Wall Street's revival. Sentiment in London, already lifted by US trading, was also given a boost by reassuring economic news. A 0.4 per cent increase in British retail sales in March came in near forecasts and provided comfort to those still expecting domestic interest rates to fall further.
Doubts were cast by some market observers over the likelihood of further cuts after Wednesday's much stronger than expected data on average earnings for the three months to February.
The recovery in sentiment spread right across the stock market. The FTSE 250, which was never tested to the same extent as the setback in the 100 index, extended its rally and finished 28.9 higher, only a fraction off the session high of 5,792.6.
Just as the mid-cap index looked set to drive through 5,800 so the FTSE SmallCap penetrated an important psychological level, moving back through the 2,500 and finishing up 22.8 at 2,508.3.
Hopes of yet more global merger-takeover developments in the near future, along the lines of the Deutsche Telekom-Italia Telecom deal, were being put forward by dealers as one of the driving forces behind the strength in London.
