A much brighter-than-expected stock market debut by William Hill, the bookmaker, and a strong rally on Wall Street on Friday evening and again at the outset of trading yesterday, brought some much-needed relief to a London equity market battered by heavy selling last week.
All the front-line indices made good progress, spearheaded by the FTSE 100 index, which last week fell through 5,000 and several previously solid support levels below that figure. But few dealers were prepared to chase the market too far yesterday, aware that it would take only the merest hint of bad news to trigger off a fresh setback.
Sentiment in the market took a fearful pasting on Friday, amid strong suggestions that the insurance companies had been selling equities because of the regulatory requirements to maintain their solvency margins. Markets were also burdened by fears of a rise in domestic interest rates and concerns about US earnings quality.
The pressure on the market was increased substantially by the hedge funds, which, scenting blood, were aggressive sellers of the FTSE future and other derivatives.
London got off to a buoyant start to the day, with traders marking prices higher in response to the rally in US markets on Friday when the Dow Jones Industrial Average settled a net 28 points lower, having been down more than 240 points at its worst and the Nasdaq finished a shade higher on balance. With no sellers of any substance in sight, the market began to rebuild its confidence, helped by the absence of the much-rumoured profits warning from Corus, the steel manufacturer, and any other bearish news.
By the close, the FTSE 100 had recouped 126, or 2.7 per cent, to 4,756.8, having hit a day's best of 4,761.7, just before the close.
The broader market also celebrated the better mood in the market, with the FTSE 250 closing 52.7 higher at 5,742.5, its best of the day, and the FTSE SmallCap moving up 6.7 to 2,427.4.
The relief factor was also at work in the Techmark 100 index which rallied 21.75, or 2.5 per cent, to 902.86, with strong recoveries by many of the tech stocks accompanied by good gains in the biotech and related issues that had been shunned recently.
Turnover in equities was 2.2 billion shares.
