BRITISH stocks scrambled their way back from an early bout of weakness to end a relatively quiet session modestly higher on balance helped once again by a powerful opening performance by Wall Street and a strong showing by global bond markets.
The latter raced to another all time intraday high minutes after the start of trading, driven by a good showing by oil stocks, which responded to a spate of cold weather across the east coast of the US.
But it was only during the last hour or so of trading that London's FTSE 100 index managed to move into positive territory, having spent most of the session fretting about the potential for further rises in British interest rates.
Earlier in the day, London had reacted quite violently to the October producer prices data, which showed a surprisingly high 0.5 per cent increase in producer input prices. This number, however, was quickly revealed as being influenced by the recent up tick in oil prices.
The close of trading saw Footsie 3.9 higher at 3,914.7, but there was less success for the second line stocks where the FTSE 250 settled only 0.2 ahead at 4,395.8. The SmallCaps fared better with that index gaining 0.9 to 2,159.7.
Marketmakers remained sceptical of the market's ability to remain above the 3,900 level in the short term, but said London would march in tune with Wall Street. One dealer was extremely wary of the US market and said: "Wall Street is flying on nitrous oxide at the moment. It could grind to a halt and go the other way at any moment."
Some strategists see opportunities in the British market after its recent 150 points plus setback from its October 21st closing high.
Noting the impact on the equity market of the recent interest rate rise and the strength of sterling, Mr Bob Semple, UK equity market strategist at NatWest Securities, said: "If the market falls further from current levels, we would be looking to buy, as the downside is limited."
He said that, for those prepared to take a longer perspective, preemptive policy action points to lower inflation in the medium term and a strong underpinning from gilts in the second half of 1997.
The absence of the much rumoured takeover bid for East Midlands Electricity did not prevent the shares from moving up strongly. Traders took the view that a bid from Dominion Resources would eventually materialise and that any offer would attract the attentions of a white knight. Houston of the US and Severn Trent, the British water utility, were said to be interested in a counter bid.
Big options trading ahead of Friday's interim figures drove Railtrack to the top of the FTSE 100 performance league while a buy note from Credit Lyonnais Laing lifted ICI. The day's two newcomers, Majestic Wine and Scottish Highland Hotels, both made good market debuts.
Turnover at 6 p.m. was a poor 492.8 million shares while customer trading on Friday was worth £1.44 billion.
