A SURPRISE burst of buying interest in derivatives caught London's market-makers on the wrong foot, causing them to scramble to close short positions in many of the leading stocks.
The future has traded at a discount to the cash market and to fair value for some weeks, as the market fretted about the possibility of global interest-rate moves.
The action in the future began to impact on the cash market shortly after the opening and picked up quickly as the session wore on, prompting "panicky covering" of short positions in derivatives.
The head trader at one big London broking house said most market-makers had been "taken to the cleaners" by the market's sudden rise. "The general feeling was that, with Wall Street closed, no shift in interest rates and general worries about the non-farm payroll figure, the market would have kept on hold."
The FTSE 100, which has looked increasingly vulnerable over the past couple of sessions, raced higher from the outset and eventually closed just off the day's high, up 46.5 at 3760.6. The FTSE mid-250, on the other hand, could only muster a 4.9 rise at 4371.1.
