London stocks shrugged off an early bout of jitters, triggered by last Friday's slide on Wall Street and a fresh sell-off on Asian markets yesterday, preferring to focus on weaker-than-expected domestic economic news and good gains in other European markets.
Consequently, the FTSE 100 index recouped all and more of last Friday's 27.9 point loss, finishing the session 34.5 higher at 4,852.0. Buying interest in the leaders did not, however, filter down into the second liners and small cap stocks, which struggled throughout the session.
The FTSE 250 index, with a big representation of housebuilders, which performed well yesterday after buoyant results from Persimmon, finished the day 6.8 ahead at 4,610.2. But the FTSE SmallCap index never managed to overcome its initial weakness, and eventually settled with a 1.5 loss at 2,241.6.
But there was no disguising the thinness of trading in the market yesterday, with already low turnover made even worse by the absence of any lead from the US, whose markets were closed for the Labour Day holiday.
"It was almost unreal in the market today," said one senior marketmaker. He said that markets were hit hard at the start because of the 5 per cent fall in the Hong Kong stock market.
At its lowest ebb yesterday, shortly after the close of far eastern markets, the FTSE 100 index was down 22.2 at 4,795.3.
But after an initial markdown of share prices by marketmakers, he said, there was very little genuine business being transacted.
The mood of the market was transformed, however, by the day's economic news which included provisional M0 money supply details for August and final July M4 money supply numbers as well as July consumer credit figures, all of which were viewed as reducing the need for a rise in UK interest rates.
July's consumer credit figure was £507 million sterling, against a consensus forecast of £1 billion-plus, while M0 money supply rose 0.2 per cent in August, against most forecasts of slightly higher than that.
The Purchasing Managers' Report for August, showing its index down to 51.3 from a revised 53.0 for July, indicated that sterling's strength is tending to choke off overseas demand for UK goods.
Worries about possible increases in UK, US and German interest rates have been partly responsible for unsettling global markets recently, along with the problems in the Far East.
At the 6 p.m. cut-off point, turnover in UK equities totalled a miserable 492 million shares, one of the lowest daily figures this year. Dealers said they expected activity to pick up substantially this week as the peak summer holiday period comes to an end.
Oil shares featured prominently in the market's advance, led by Lasmo which responded to more exploration success. Of the stocks closely linked to Asian markets, Standard Chartered, Footsie's worst performer last week, rallied after analysts said the stock was oversold.
