A surprise round of Europe-wide interest rate cuts, instigated by the Bundesbank and encompassing all 11 single-currency countries, brought much needed respite to a beleaguered London stock market.
Such was the momentum behind London's recovery that the FTSE 100, which had earlier posted its third three-figure decline of the week to date, eventually finished a net 58.9 higher at 5,566.1. That closing gain was in sharp contrast to events earlier in the day that had seen the FTSE 100 extend its recent serious reversal and post a 130-point fall, taking the index back below the 5,400 level.
At its low of the day, the Footsie was down 467 points or 8 per cent on the week and looking vulnerable.
Dealers said the European cuts would almost certainly be followed by another reduction in British interest rates after next Thursday's meeting of the Bank of England's monetary policy committee.
Even before the European rate cuts were announced there was a growing feeling in London that the latest dismal British economic news might have provided the committee with the necessary ammunition for it to reduce British rates for a third time since the autumn.
The latest Chartered Institute of Purchasing Managers survey showed that the weakness of the economy had now spread to the services as well as the manufacturing sector.
And there was no surprise at the Confederation of British Industry's November survey of distributive trades, which said that retail sales volumes were at their weakest level since March 1995.
The economic news was only part of a morning session of almost unremitting gloom in London, where dealers also had to bear the burden of another spate of the profit warnings that have been gradually eroding the market's confidence in analysts' earnings forecasts for next year.
The news from abroad, prior to the euro-zone rate cuts, was equally depressing, with Wall Street retreating on Wednesday as the Dow Jones Industrial Average fell 69 points. There was also renewed talk about problems in Russia, Brazil and other emerging markets.
Wall Street gave no help to London during the afternoon session, however, with the Dow showing a 70-point fall as London closed.
Gains in the leading stocks did not influence the rest of the London market. The FTSE 250 settled 47.8 down at 4,756.6 after falling 53.7, while the FTSE SmallCap closed 15.4 down at 2,021.4 after hitting a low of 2,019.7.
Noting the euro-zone rate cuts and the chances of another British rate cut after next week's monetary policy committee meeting, Mr Corey Miller at Paribas said: "A 25 basis point reduction in rates looks even more likely after today's survey news, which is becoming increasingly more important.
"We are staying with our 6,100 end-year FTSE 100 forecast."
Turnover reached 1.02 billion shares by the 6 p.m. count and featured more intense activity in BP and Shell. That was the third consecutive day that volume had breached the one billion mark.
Among individual stocks, Great Universal Stores, which earlier this year acquired the Argos chain of catalogue stores, announced a fall in profits due to the costs of its acquisitions. Combined with wider fears over high street sales, the news cut shares in the home shopping group by 25p to 549p.
Another FTSE 100 company with bad news to report was Anglo-Dutch publisher Reed Elsevier, down 10 1/2p to 443p, after saying 1998 profits would be 6 per cent lower than previously forecast.
Elsewhere in the FTSE 100 there was good news with Bass reporting an upturn in sales after the summer slowdown and profits at the high end of forecasts.
The market raised its glasses to the brewery and leisure group lifting its shares 17p to 830p.
But a profit warning on the full year emerged from condom and medical gloves maker London International Group led shares in the group down 57p to 130 1/2p.
