London's equity market moved confidently back on to the upside trail yesterday, responding to weak retail sales data for December, which led to hopes of further interest rate cuts.

Adding to the generally bullish mood in London was widespread relief that the speech made by Mr Alan Greenspan, chairman of the US Federal Reserve, to the House of Representatives, did not lob any hand grenades into markets viewed by many observers as overvalued.

London was always looking to make progress yesterday. The FTSE 100 kicked off in good form in response to Wall Street's powerful overnight rally, which saw the Dow Jones Industrial Average recover from an early 120 point slide to finish the session 14 points ahead. Wall Street came in strong again in early trading yesterday.

Sentiment in London was given a big boost by the 0.9 per cent fall in retail sales during December, which shocked a market looking for a modest 0.2 per cent increase.