British stocks embarked on a determined advance yesterday, with investors responding to Wall Street's opening surge and looking on the positive side. Pushing prices higher, dealers said, was continuing takeover speculation, plus talk of more share buy-backs and special dividends. Both factors are adding to the mountain of cash held by the institutions.
On the downside, however, is the Asian turmoil, allied to increasing unease about the possibility of President Clinton being forced to resign, which has put pressure on the dollar.
Asia is seen by many as the market's biggest problem in the short to medium term, following the recent spate of profit warnings. IBM of the US and London's EMI suffered badly last week after noting the potential threat to their earnings.
At the close, the FTSE 100 was 55.8 higher at 5,237.2, having touched a day's best of 5,244.4 after Wall Street's takeover-inspired strong opening. Footsie is now less than 100 points away from its previous record.
Earlier, London nudged ahead at the outset after Hong Kong settled not far short of 1 per cent firmer, Tokyo rose 1.6 per cent, Seoul 1.8 per cent better and Jakarta, the most recent severe casualty, gained over 5 per cent.
Gains in the leaders did not follow through into the second line stocks, however. The FTSE 250 index was always in the red, and posted a closing fall of 12.2 at 4,794.7. The FTSE SmallCap index managed a modest 2.6 improvement at 2,359.8.
One of the main reasons behind the market's positive mood was news of a near-$10 billion (£7.1 billion) takeover in the US with Compaq Computer's proposed acquisition of Digital Equipment, which helped to restore some of the lost confidence in US hi-tech stocks. Wall Street came in on a firm note yesterday afternoon, climbing over 50 points, before reacting on profit-taking.
In the UK, the recently depressed oil stocks caught the eye, with investors increasingly adopting the view that the sector had been oversold after the crude price dropped below $15 a barrel.
