Dealers in London's equity market were caught on the wrong foot yesterday by Wall Street's late rally on Wednesday. The Dow Jones Industrial Average had been exceptionally weak for much of Wednesday's session. It fell in excess of three figures at its worst, but rallied with such momentum that it finished only 4 points lower, after a sudden burst of buying by mutual funds.
That mutual fund buying was said to have encompassed many leading British stocks listed in the US and led to a big mark-up in those stocks as London opened.
Already lifted by those influences, sentiment in London received two further doses of good news. The Confederation of British Industry's latest survey of distributive trades pointed to a pick-up in retail sales during December, while even more bullish for the market was news that the monetary policy committee had chosen to leave domestic interest rates on hold.
The FTSE-100 index responded to the good news with another sparkling performance, recovering all of Wednesday's losses and more before coming off during the late afternoon and finishing the day a net 13.0 up at 5,237.1, its sixth positive performance over the past seven trading sessions.
Wall Street opened weakly again yesterday, with the Dow Jones Industrial Average falling more than 100 points shortly after trading commenced in the US.
The demand for British stocks was seen right across the board, with the FTSE Mid-250 index adding a further 10.9 at 4,880.0. The Mid-250 has now risen for eight straight sessions, putting on 182 points or 3.9 per cent.
Similarly, the FTSE SmallCap posted its eighth consecutive gain, moving up 6.8 to 2,345.2, leaving that index up 55.21, or 2.4 per cent.
The US overnight influences offset further turmoil in far eastern markets, where alarm bells continued to ring, specifically concerning Hong Kong, which fell 3 per cent, Singapore, down 7 per cent, and Jakarta, whose stock market dropped a whopping 12 per cent.
There were mixed views in London about potential short-term moves in markets. The head trader at one of the big European securities houses said he felt the constant stream of new money coming into the market would see London insulated somewhat against any global sell-off in stock markets. "Big falls in international markets leave London undervalued," he said.
Others took an opposite view, however, pointing out that British stocks could not ignore downside pressures from global markets.
The turmoil in the Far East and big action in US markets provided a much-needed spark to activity in London where turnover in equities topped the 1 billion-mark for the first time in many weeks, eventually reaching 1.06 billion shares by the 6 p.m. cut-off point.
The two former components of British Gas, BG and Centrica, were among Footsie's strongest performers. - The retail sector got a lift after the retail sales figures allayed fears of a Christmas slump.
Meanwhile, Majestic Wines said claret, champagne and Australian wine helped boost its sales after a 22 per cent increase in the eight weeks from November 4th to December 29th and the shares rose 20p to 421 1/2p.
Shares in sports footwear supplier Hi-Tec Sports firmed 1p to 47 1/2p after it said fashion fans were now overlooking traditional training shoes in favour of hiking and walking shoes, helping it boost half-year profits by 32 per cent from £921,000 to £1.2 million.
And on the back of these results Kingfisher, which runs a host of chains including B&Q and Comet, improved another 10 1/2p to 876p, Dixons firmed 10p to 587p and Boots nudged 6p higher to 915p.
Great Universal Stores rose 11 1/2p to 783p, while Argos took a 12p leap to 563 1/2p. Next followed the fray with an 18p jump to 723p.
