A strong start on Wall Street and some good news from a leading Internet group ensured that the FTSE 100 index started the pre-Easter week on a positive note.
During the morning it looked as if London was in for a quiet day with the FTSE 100 index barely changed, as weakness in new economy stocks was offset by strength in some of the defensive sectors.
The agreed deal between Powergen and Eon of Germany was no big surprise for the market given that the two companies had first revealed they were in talks back in January.
But at least it was a positive announcement from the corporate sector which had given the market little but bad news of late.
The potential for further bad news worried investors in Marconi, after weekend reports that the company was planning to announce substantial job cuts. And there were worries ahead of the results of chip designer ARM Holdings tomorrow. Meanwhile Euro Sales Finance was the latest smallcap group to issue a profits warning.
Footsie was shaken out of its early lethargy at lunchtime after Amazon.com, the online retailer, forecast that its first quarter revenues would be higher, and its losses lower, than the markets had been expecting.
As it became apparent that Wall Street would open higher, Footsie duly surged ahead. The blue chip benchmark closed 61.8 points higher at 5,663.3. The other indices could not keep pace with Footsie's afternoon surge. The FTSE 250 fell 8.3 to 6,043.3 and the SmallCap dropped 15.9 to 2,822.7. Despite the Amazon news, the Techmark 100 index of leading technology stocks was worst hit, dropping 31.03 to 1,749.08.
With interest rates falling in the US and the UK (and possibly in Europe on Wednesday), the main threat to the equity market appears to be the outlook for corporate earnings.
Analysis by Dresdner Kleinwort Wasserstein found that analyst estimates of UK earnings fell in March by 0.8 per cent for 2001 and by 1.1 per cent for 2002. Downgrades were particularly strong in the telecoms and technology sectors.
Mr Richard Crehan of Morgan Stanley warns that bad news on earnings may not yet be reflected in the market. "The consensus estimate for 2001 is now 11 per cent (well above our forecast of 7 per cent)," he says.
Mr Crehan says the downgrades have largely been in the technology, media and telecom sectors. He thinks the effect of a global slowdown has yet to be reflected in consumer and industrial earnings forecasts.
Turnover was subdued with 1.57 billion shares traded by the 6 p.m. count.
