STEEP fall in sterling, which gave up more than one per cent against both the dollar and the D Mark, was the latest dose of goodnews for an equity market, which moved decisively into new territory yesterday.

The sharp decline in the currency came in the wake of the increasingly firm conviction that there would be no increase in interest rates until after the general election at the earliest.

All the most recent evidence - most notably retail sales figures for December and the CBI survey on industrial trends - pointed to a slackening in consumer spending and inflationary pressures.

Big exporting companies were in the vanguard of the equity market's spectacular thrust into new ground. Badly affected in recent months by the impact of a steadily rising pound against the dollar and other currencies, all the foreign currency earners moved into top gear.

Drug stocks caught the eye as big beneficiaries of the currency trends but were also helped as the takeover speculation surrounding the sector continued to intensify. Other sectors enjoying the sudden return to favour included engineering stocks.

Market strategists insisted yesterday's fall in sterling did not mean the bad currency led news for the big exporters had passed for good. "The downgrades won't go away yet," said one.

Activity in equities was surprisingly low given the big gains across the market, although traders said the relatively muted turnover was a reflection of the widespread stock shortages.

At 6 p.m. turnover was 885.1 million shares, while customer business on Wednesday was valued at a disappointing £1.14 billion sterling.