It was the bluest of blue sky days for London's equity market yesterday, with the FTSE 100 index recouping over two-thirds of the ground lost last week thanks to a barrage of takeover activity. The sudden burst of deals involved confirmation of merger talks between BAT and Zurich Group, the Swiss insurance company, merger proposals for Reed Elsevier and Wolters Kluwer of Holland, and a hostile tilt at Redland, the building materials group by Lafarge of France.
More good news for the market came with a resolution to the Grand Metropolitan/Guinness/LVMH impasse which had threatened the tie-up between the two British groups.
And there was a smaller bid, for Peek, the electronics company, from Thermo of the US.
The new deals alone were valued in excess of £40 billion sterling. Predictably strong responses by shares in all of the companies involved added over 22 points to the FTSE 100 index. More important, the sudden flurry of bids reawakened the market to the potential of more big deals being done in the short and medium term.
There were other mega-mergers announced in Europe, including a deal involving two of the Scandinavian banks, Nordbank of Sweden and Merita of Finland, and a massive insurance offer by Generali of Italy for AGF of France.
Those also helped to light the blue touch paper in the market, especially in the financial sectors on talk of a substantial restructuring in the UK and across Europe.
As the dust settled after a frantic session, Footsie regained the 5,300 level lost only last week, finishing with a gain of 72.8, or 1.5 per cent, at 5,300.1.
The FTSE 250 index was given a big boost by the bid for Redland, and ended the session 45.7 higher at 4,920.0. The SmallCap gained 8.3 at 2,387.0 while the All-Share index moved up 30.5 to 2,486.47.
The FTSE 100's storming performing erased much of the gloom that descended on the market last week when confidence was jolted by a series of damaging events.
Mr Alan Greenspan, chairman of the US Federal Reserve, warned that the US economy was on an "unsustainable track" which the markets interpreted as a warning of higher US interest rates in the near future. And the Bundesbank caused more problems by hoisting its repo rate and triggering rate rises across much of Europe.
Helping London finish only just below the best levels of the day was a positive opening by Wall Street where the Dow Jones Industrial Average posted an early 50-points plus gain.
In its regular monthly survey carried out by Gallup, Merrill Lynch said that over three-quarters of UK fund managers believed Britain will participate in European Monetary Union before the next general election. The survey also revealed that more UK fund managers are buyers of US stocks than sellers, for the first time in three years.
Turnover in equities was 680 million shares.
