The FTSE 100 index made another dash towards 5,000 early yesterday, got to within 12 points and then ran out of puff to finish modestly lower on the day. The undertone remained firm, however, with dealers claiming that the continuing spate of takeover bids, mostly in the smaller companies arena, may well move up a gear to encompass the FTSE 100 and FTSE 250 areas. "If what everyone expects actually happens then there is absolutely no question we'll be through 5,000 and possibly even challenge the all-time high of 5,367.3," said the head dealer at one big European house.
Turnover in the equity market was never more than run of the mill, with many of the big institutions preferring to hold off until the outcome of the latest meeting of the monetary policy committee is made known at noon today. Few observers expect an increase in UK interest rates until after Christmas.
There is also some concern in dealing rooms that the US non-farm payroll report for November might presage a rise in US interest rates after the next meeting of the Federal Reserve's open market committee, scheduled for December 16th.
The FTSE 100 index finished the session 6.9 off at 4,970.7. At its best, shortly after the start of trading, the index was more than 10 points higher.
The FTSE 250 - which has tended to lag the senior index during the recent rally which has seen the 100 index gain 145 points - staged a catch-up, outperforming strongly to close 24.0 higher at 4,692.4.
Helping drive the second-liners ahead was the usual burst of takeover speculation, this time in BICC, the electrical group, and Greenalls, the pubs and hotels company. In addition, many of the leading information technology companies rose strongly as the market picked up news that a new sector, Information Technology, is being constructed for the FTSE Actuaries. The FTSE SmallCap rose 3.9 to 2,278.9.
Traders insisted that more bids were in the pipeline. "The merger and acquisition story is rumbling on and the story is that the City's corporate finance departments are currently working 24 hours a day on potential bids," said one salesman.
Wall Street's sedate overnight performance and the negative showing by Tokyo and Hong Kong played only a small part in the day's events.
But Wall Street's poor opening yesterday, which saw the Dow Jones Industrial Average slide more than 50 points not long after trading commenced in the US, kept the lid on performance in UK stocks.
Dealers continued to complain about extreme volatility in the UK equity market. But the technical team at Robert Fleming Securities pointed out that there were more frequent changes of 4 per cent or greater in a week between 1990 and 1992 than there are now. Flemings said UK equities have been through a period of relatively low volatility, especially in 1995 and 1996.
Turnover at 6 p.m. was 732.5 million.
