The Grinch may have stolen Christmas but traders quickly decided yesterday that Alan Greenspan had saved the new year.
The US Federal Reserve's surprise half-point interest rate cut on Wednesday and Wall Street's euphoric reaction ensured a buoyant opening for the UK market yesterday.
Fed chairman Greenspan has rescued the market with rate cuts on several occasions in the past, most notably during the autumn of 1998 when investors were concerned about problems in emerging markets and about the near-collapse of the US hedge fund, LongTerm Capital Management.
Amid hopes of further US rate cuts, the FTSE 100 index duly surged to a triple-digit gain at the opening. The blue chip benchmark reached its peak for the day, 6195.4, up 155.3, after just eight minutes of trading.
After that knee-jerk bounce, however, the index made little progress for the rest of the day. At the close, Footsie was 145.7 points ahead at 6,185.6.
The other indices were also stronger. The FTSE 250 gained 115.5 points at 6,580.3 and the SmallCap rose 37.4 to 3,177.1. The Techmark 100 index of leading technology stocks showed the biggest proportionate rise, jumping 115.2 to 2,459.87.
At the sectoral level, new economy stocks held sway with COLT Telecom, Energis, Sage, Misys, WPP, Reuters and ARM all recording double-digit gains. There was switching out of defensive groups such as BAT, Cadbury and Diageo with programme trades believed to be involved. Volume was heavy for the third trading day of the year with 2.62 billion shares traded 6.00 p.m.
There seemed to be two factors capping London's overall gains. The first was that Wall Street did not maintain the pace of Wednesday's rally in early trading (although nor did it give up its gains). The Dow and Nasdaq were roughly flat by the London close.
The second factor was that an early cut in UK rates is not expected. Domestic economic data were rather mixed, and did not appear to make a decisive case for a cut in UK interest rates when the Bank of England's monetary policy committee meets next week.
