THE gloom that has enveloped global bond and equity markets for the past four trading sessions finally looked to have run its course yesterday.
Bolstered by an early upward spiral on Wall Street, which was sharply extended in later trading, and in bond markets, the FTSE 100 index closed at the day's high and looked set to continue its strong performance this morning.
Footsie easily recaptured the 3,700 level and closed 11.0 firmer at 3,725.6. The second liners fared less well, however, managing only a 4.1 gain at 4,182.0. Dealers said that most of the day's customer business was concentrated in seeking value in the leaders.
There was an upturn in activity in small company stocks, in the wake of the 50 million smaller companies basket warrants issued by BZW late on Tuesday. BZW expects smaller companies to out perform the market. Each basket represents an investment in 60 small companies, including Allders, Avon Rubber, Clyde Petroleum, Graham Group, Persimmon and Stanley Leisure.
London was given an additional push yesterday by the latest economic news, which revealed a large decline in retail sales in January. Sales fell 0.6 per cent, against a consensus forecast of a flat performance, news which dealers said increased the chances of a further British interest rate cut.
But the main bullish impetus for London came from bond markets, which made rapid progress after an uncertain opening. US Treasury bonds, which plummeted 1 3/4 points in the US overnight, began to stabilise in European trading and then galloped ahead as Wall Street opened, taking the Dow Jones Industrial Average with them. The Dow was over 60 points ahead an hour after London finished.
News of another takeover bid - the increased 500p a share offer for Lloyds Chemists from Germany's Gehe - was a bull point for a market looking for further action on the merger/takeover front. Speculators were busy hunting for the next bid candidates and again settled on Ladbroke, the betting to hotels group and the insurance sector as the most likely targets.
Ladbroke was aggressively bought in the cash and options markets, with traders continuing to take the view that a hostile move for the company would materialise.
One insurance specialist said there was "knowledgeable" buying of London & Manchester, the life company, which has been cutting costs recently. The insurance group's increasing specialisation in pensions is said to have attracted the attention of the big composites.
Footsie was hit for six at the outset, plummeting 25.9 as market makers took avoiding action in the wake of the big sell off in the US overnight. But with confidence gradually returning in gilts, the leaders clawed back their early losses.
