A RELATIVELY comforting performance by gilts and another powerful opening by Wall Street helped London's equity market negotiate fairly successfully the first session of what could be a very tricky week.
The Dow Jones Industrial Average raced up 35 points within minutes of the opening yesterday and advanced further to show a 50 points plus gain an hour after London closed for business.
But the market had to endure some uncomfortable moments early in the session as marketmakers took avoiding action in the wake of the IRA bomb and ahead of Thursday's publication of the Scott report into the arms for Iraq affair.
Both events were viewed as having potential to cause severe damage to market sentiment. A resumption of the IRA's bombing campaign in Britain was viewed as extremely bearish for the leisure/hotels industry.
The FTSE 100 index closed the day a net 10.3 firmer at 3.726.6, recovering from a weak opening, but the FTSE Mid 250 proved a disappointment, only just managing to close in positive territory up 0.3 at 4,152.2.
At one point the Mid 250 looked set to launch a determined challenge to its previous all time high, 4,152.8, achieved in 1994.
Dealers said the second line stocks were being held back by the fear of more profit warnings emerging in the March reporting season.
There was comfort in the day's economic news, which revealed a smaller than expected rise in producer prices, reviving hopes that a further reduction in interest rates may not be too far away.
The data helped gilts, which held steady in a narrow trading range.
Senior marketmakers said they expected London to continue to make progress, as long as Wall Street held up. "There was very little selling pressure after an early flurry, and plenty of buyers came on during the afternoon," said one trader.
A leading marketmaker at a European securities house said the market attracted buyers just below the 3,700 mark on the Footsie.
There were also rumblings of more takeover activity and rumours that the electricity sector, which has seen a number of false starts in the past few weeks, would be the target of the next big bid. Northern Electric, which was the first to attract a predator when Trafalgar House launched its unsuccessful bid for the group in 1994 was the name being mentioned late in the session.
The best individual performance in the Footsie came from Blue Circle, which responded to a stock shortage, while on the downside Granada was badly affected by the IRA bombing. BP moved up amid hopes that today's fourth quarter figures may include an increase in the dividend.
Turnover at 6 p.m. was a respectable 650.5 million shares. Customer business on Friday was valued at £2 billion sterling.
