Hopes that the Russian-induced turmoil which has been affecting global markets may at last have calmed down, at least in the short term, helped British stocks stage an encouraging rally for much of yesterday.
London's good showing was due in part to a couple of sizeable takeover bids, both from the US and both targeted at industrial stocks - David Brown and TLG, the former previously known as Thorn Lighting.
But there was never any real buying power behind the London market yesterday, with a disappointing mid-morning decline by Wall Street upsetting what looked like being a substantial recovery in British stocks at the end of an extremely difficult week.
"Wall Street was a real disappointment, both overnight and yesterday, and took the wind out of the sails of the European markets," said one market-maker in London.
Overnight, Wall Street's Dow Jones Industrial Average had posted a three-figure gain, only to turn round suddenly towards the finish, burdened by a series of damaging reports on the impact of the Russian crisis on US banking stocks.
Yesterday, the Dow kicked off the session in confident form, advancing 80 points in the wake of the US employment report for August which showed a 365,000 increase in the non-farm payroll. That number posed no threat to the market, dealers said, but there were concerns with the increase in hourly earnings, up seven cents compared with expectations of five cents.
When the curtain came down on a week of extreme volatility, the FTSE 100 showed a 48.3 advance to 5,167.0 on the day, reducing the fall on the week to 82.4 or 1.6 per cent.
There was less volatility in the second-liners and small caps. The FTSE 250 finished the day at a session high, up 14.5 at 4,663.3, driven ahead, according to dealers, by the prospect of more takeover bids in the pipeline.
The FTSE SmallCap index gained 1.0 to 2,069.2, leaving that index 56.9, or 2.7 per cent, lower over the week.
