The sudden change of heart in the London equity market, which took hold on Monday gathered momentum yesterday, pushing the FTSE 100 briefly above its previous record close.
A late dip left the index tantalisingly close to its closing peak of 5,330.8, ending 89.1 ahead at 5,326.3. At its best, in mid-afternoon when Wall Street was rampant, the index touched 5,338.9, up 101.7.
There was no shortage of positive news for equities, with the main driving force, according to dealers, being the weak Confederation of British Industry (CBI) survey of industrial trends, which indicated no inflationary pressures.
The market interpreted the CBI survey as sharply reducing the chances of the monetary policy committee recommending another rise in domestic interest rates after its next meeting scheduled for February 4th. Wall Street's surge at the start of trading in the US yesterday, which saw the Dow Jones Industrial Average post a near 90 point gain, provided a further thrust to the British market in afternoon trading.
A modest rise by Wall Street on Monday, in response to US President Bill Clinton's resolute denial of claims concerning his alleged affair with a White House aide, was also supportive.
The Asian turbulence that has been the bugbear of global markets since last autumn stayed in the background yesterday - the Hong Kong market rose 3 per cent while others were quietly mixed.
Leading stocks also reflected expectations that the recent intense takeover speculation would spread right across the market.
There were downside shocks, however, in the second-liners and smaller stocks, with the former suffering a big hit from two damaging profit warnings, from Powerscreen International and Premier Farnell, two of the engineers. The former's shares lost more than half of their value and the latter in excess of 12 per cent.
The impact of those performances was instrumental in depressing the FTSE Mid-250, which finished the session down 5.5 at 4,789.2. At its worst, the index showed a 12.9 decline.
The FTSE SmallCap was also under downside pressure during the day, and closed 3.3 off at 2,356.5.
There were mixed views among market-makers and traders about the market's ability to drive through its closing and intra-day peaks.
