London received another battering on its eastern front yesterday, but the US cavalry rode to the rescue in the afternoon to allow the FTSE 100 index to record a modest gain on the day.
The news that Russia had decided to let the rouble fall, and had imposed a 90-day moratorium on debt repayment, was not the start to the week most investors had been hoping for. Concern about the stability of Russia's finances had dominated market talk towards the end of last week.
With Japan, and most of the Asian markets, recording falls, and European markets showing opening losses in response to the Russian news, the international background was unfavourable.
It looked as if Footsie was set to spend another day being dragged down by weakness elsewhere. Technical factors did not help, with ex-dividends taking 8.5 points off the index. Before 10.00 a.m., the blue-chip benchmark was 57 lower at 5,398.0.
But the British market showed some surprising signs of resilience. One factor was a raft of bid stories: the news that Booker, the food processing and distribution group, was in talks with Somerfield, the supermarkets chain; rumours of an approach for Selfridges, the department store; and speculation that Nomura might be buying Thistle Hotels. As the market closed, Thistle said it had terminated discussions, however.
The big BP-Amoco deal failed to lift market spirits for long last week, but a series of takeovers or mergers would remind investors of some of the fundamental factors that supported markets in the first half of the year.
As the morning wore on, Footsie regained the lost ground and received a further lift when Wall Street opened strongly, with the Dow Jones Industrial Average showing a 50-point-plus gain in morning trading.
Investors appeared fairly relaxed about the potential impact of President Clinton's grand jury testimony, with impeachment still seen as highly unlikely.
Footsie had a best level of the day of 5,485.9 in mid-afternoon and ended 12.2 ahead at 5,467.2. But the weakness of the overall market was reflected in further falls in medium-sized and smaller stocks. The FTSE 250 index dropped 45.9 to 5,136.6 and the SmallCap 12.1 to 2,321.3.
