THE stock market's ability to surprise was very much in evidence yesterday as a much weaker-than-expected set of US inflation numbers for March saw global bond markets race higher, taking equities, including London shares, up with them.
The 0.1 per cent rise in the consumer price index in March, with the core figure nudging up 0.2 per cent, produced a buying spree across US markets which had been bracing themselves for news similar to the strong producer price details released last Friday.
Those figures had induced a 148-point slide in the Dow Jones Industrial Average, which in turn hit global markets.
Dealers in London, taken aback by the inflation numbers, as compared with the US producer price details, instantly hoisted their dealing prices as bonds shot up. British gilts were up well over a full point at the long end of the market.
The FTSE 100 index, which had initially climbed almost 25 points, subsequently gave back much of its early rise, with marketmakers unconvinced by the US market's overnight performance. But they needed no convincing when the inflation figures were published.
Taking the view that such benign numbers indicated the Federal Reserve might not have to increase US interest rates after its next meeting, scheduled for May 20th, they lifted prices accordingly.
The FTSE 100 finished the day up 35.1 at 4,286.8, regaining all and more of the ground lost over the previous two sessions.
The FTSE 250 was slightly left behind by the speed of the leaders' upturn, but still managed to record a 15.9 advance at 4,521.7. The SmallCap index put on 3.9 at 2,293.1.
London was also helped along by the latest news of retail sales, detailed in the latest monthly survey by the British Retail Consortium, which said price increases are being held down and that prices rose 3.7 per cent in the year to March, compared with 4.3 per cent in the year to February.
That news, along with the subdued producer price data released on Monday, gave heart to the gilts market even before the upsurge in US bonds.
Substantial gains in share prices did tempt the big institutions back into the market yesterday after a long period of inactivity.
Turnover at the 6 p.m. cut-off point reached 787.9 million shares, well up on the most recent levels and a welcome sight for marketmakers and dealers who had expected activity to remain in the doldrums until the election is out of the way.
