A rally in recently depressed Far Eastern stock markets and a scintillating return by Wall Street after its long holiday weekend was just the tonic needed to inject sparkle into London's equity market. Another story helping to galvanise sentiment in British stocks was that a big bid in the property sector, involving Burford and MEPC, was imminent.
The twin boost from Asian markets and Wall Street pushed London's FTSE 100 index into overdrive, leaving the index up 82.0, or 1.7 per cent, at 4,952.2.
The bewildering speed of the leaders' gains yesterday tended to leave the second and small-cap stocks floundering in the wake of the market front-runners, but the FTSE Mid-250 still managed a 23.0 gain at 4,633.2 while the SmallCap moved up 8.4 to 2,250.0.
Yesterday's surge left Footsie up 134.7, or just short of 3 per cent, over the past two sessions.
With the market adopting the view that the recent sell-off in Far Eastern currencies and markets may well have exhausted itself for the time being, and with Wall Street responding to some encouraging US economic news, London equities bounded ahead in mid-afternoon.
Market-makers insisted they had not been caught on the wrong foot by the day's events. "There was a sudden burst of buying from Europe and the US which we simply could not satisfy; hence the big closing gains," said a senior market-maker at one big European securities house.
A late recovery by Asian markets saw Hong Kong climb more than 2 per cent and Tokyo more than 1 per cent at their respective closes, enabling Footsie to kick off in good heart and move up in excess of 20 points minutes after the start of the session.
But the weaker-than-expected purchasing managers' survey from the US shifted European markets into top gear. The NAPM index came in at 56.8, against a previous month's figure of 58.6 and forecasts of 58.1, and was viewed as lessening the chances of an interest rate rise after the September 30th meeting of the US Federal Reserve's Open Market Committee.
The Dow Jones Industrial Average quickly raced ahead and was trading 140 points higher as London closed.
One of the few disappointments for dealers in London was the overall level of turnover in equities.
At the 6 p.m. cut-off, turnover was shown as reaching 705 million, a figure viewed as disappointing given the bullish news behind the market's rise.
The concentration of activity in the highly liquid Footsie stocks was illustrated by the relatively low levels of business in companies outside the elite group. Non-Footsie shares accounted for only 44 per cent of the total.
