A sharp fall in sterling, positive corporate news, and a touch of interest rate optimism, combined to send the FTSE-100 Index above 5,000 for the first time. It is just 10 months since Footsie, launched at 1,000 at the start of 1984, reached the 4,000 mark. In the interim, the market has survived the election defeat of the Conservatives, four interest rate increases, a rapid rise in the pound and the abolition of the tax credit on dividends. But with a global bull market in equities in full swing, none of those domestic factors have stopped Footsie from forging ahead.
The historic day started quietly, with the leading index up only five points at 4,960.6. But the market quickly gathered pace and Footsie sailed past 5,000 in midmorning, notching an all-time intra-day peak of 5,027.7, up 67.1, during the lunchtime period. The previous intra-day high of 4,991.8 was set on July 16th, the day the Dow Jones Industrial Average broke through the 8,000 level.
A series of well-received corporate results gave a solid backing to the market. This contrasted with last week, when companies' share prices tended to fall after the release of their figures.
But the reaction to results this week has been very positive. A classic example was provided yesterday by engineering group GKN, one of the companies assumed to have been taking a beating from the recent strength of sterling.
In fact, the GKN profits easily beat forecasts, causing the shares to be Footsie's best performers on the day and giving a lift to the manufacturing sector.
Shares in exporters were also boosted by the sudden reversal of sterling. The pound shed 51/2 pfennigs against the deutschmark and 21/2 cents against the dollar, briefly dropping below the DM3.00 and $1.60 levels.
There was some hope that the Bank of England's monetary policy committee might not raise interest rates when it announces its decision today. There was also speculation that the Bundesbank might be tiring of the deutschmark's weakness.
In the afternoon, Footsie briefly faltered when Wall Street opened lower but the Dow rebounded to be around 56 points higher when London closed. Gilts were also supportive, with the benchmark 10-year issue rising by around a third of a point.
All this allowed the leading index to close 65.6 up at a closing high of 5,026.2. The All-Share also set a closing peak of 2,339.74.
Once again, however, smaller companies failed to join in the celebrations, with the SmallCap index dropping 0.3 to 2,188.8.
