LONDON'S equity market was back on the fast track yesterday with two of the main valuation indices, the FTSE 100 and the FTSE Actuaries All Share index pushing ahead to new all time closing highs. In addition the FTSE 100 pierced its previous all time intraday record.
The main driving forces behind the market's latest adventure into new ground was a successful outcome to the auction of £2.5 billion sterling worth of gilts, better than expected trade figures for June and July and the strong recovery in sentiment in US stock and bond markets, both overnight and at the outset of trading yesterday.
In the background was another burst of takeover speculation, specifically in the financial areas of the market, where the banks and insurance stocks made rapid progress.
And there was more encouragement for market traders in the gradual increase in turnover in equities.
At the end of a busy session the FTSE 100 was left with a 13.0 gain at a closing record of 3,918.7.
Second liners were also in good demand with the FTSE Mid 250 index moving up 9.5 to 4,437.8. The Mid 250 is slowly reeling in its all time high, 4,568.6, reached in April this year.
Dealers were impressed with London's overall performance, especially in view of a bout of jitters in the gilts market around midday when gilts briefly dipped into negative territory before stabilising. They eventually ended the day a couple of ticks higher across the board.
Earlier, it was the excellent outcome to the gilts auction, where there were bids for 2.7 times the amount of stock offered, and the good trade figures, that helped stimulate buying interest in equities.
Apart from the mid session wobble, the market was always looking to move higher in response to the fresh dose of bid speculation. With the Dow Jones Industrial Average making good early progress, aided by a firm bond market ahead of the auction of $12.5 billion worth of 5 year bonds, the FTSE 100 pushed ahead to a record intra day high of 3,922.1, before coming off the top following a minor bout of profit taking.
The day's big feature was the steep rise in Lloyds Abbey Life shares to a new peak amid a flurry of bid stories. These included a suggestion that the Prudential Group was about to launch an agreed offer for the life assurer as well as the more plausible talk that Lloyds TSB was about to bid for the minority 37 per cent stake in Lloyds Abbey.
Marketmakers were initially sceptical that the Pru would mount a bid for Lloyds Abbey but they refused to rule out such a move. Dealers said Lloyds TSB shares, the fourth best performers in the FTSE 100 index, had been lifted by the prospect of the windfall resulting from any takeover of Lloyds Abbey.
