A REVIVAL of confidence in international bond markets following the decision of the Bundesbank Council to reduce its repo rate quickly lifted share markets and saw many of London's leading stocks power ahead to new records yesterday.
The Bundesbank's move, which was followed by similar action by the Bank of France and elsewhere in Europe, was the second piece of good news on global interest rates this week, after the US Federal Reserve's decision not to lift interest rates on Tuesday.
Strategists said there was widespread relief as the news became known. The Bundesbank move was said to have been put in jeopardy by a stronger-than-expected survey of business confidence in Germany on Wednesday, which was followed by a sharp sell-off in bunds and also affected US bonds and British gilts.
The FT-SE 100 index closed just below the day's best levels, with a net 19.0 gain to 3891.1, an all-time closing high.
At the session high, reached only minutes before London closed the index touched 3891.9, only 2.5 points below its previous intra-day peak on Wednesday.
Second-line stocks were also being chased higher, with the FT-SE Mid-250 index closing 15.1 ahead at 4402.5. Turnover in equities continued at recent enhanced levels, eventually reaching the 650 million shares mark at the 6 p.m. count. Unusually, turnover was concentrated mostly in the FT-SE 100 stocks which accounted for over 55 per cent of the total.
London's strength at the close of business was in sharp contrast to the trend at the outset of trading, when share prices were uncertain and prone to bouts of selling pressure in the wake of Wall Street's overnight fall.
