Another session of fast and furious moves in stock prices saw London's equity market build confidently on Monday's good closing performance, helped along by more takeover action and impressive showings by international markets.
The FTSE 100 index finished the session in good heart, up 100.7 at 5,654.4. Over the last two sessions, it has risen 177.4 points, recouping much of last Friday's 190.4 decline. Although never looking like matching the performance of the senior index, the FTSE 250 also made progress, notching up a 44.3 gain at 5,100.3, largely on the back of the £1.25 billion sterling cash bid for insurance broker Sedgwick, from Marsh & McLennan of the US.
But the smaller stocks were left behind by the top 350. The FTSE SmallCap index struggled all day and eventually closed 3.5 down at 2,285.0.
Impressive performances from Wall Street on Monday and again at the outset of trading yesterday, plus good showings from most Asian markets, provided a powerful kick-start for London.
The Dow Jones Industrial Average managed to end a see-saw Monday session 32 points ahead and both Hong Kong and Tokyo delivered positive responses, helping to calm some still-ragged nerves in London.
Big gains across most of the Continental bourses, especially Frankfurt and Paris, added to the gradually improving general outlook in London, as did the firmer trend in the gilts market.
There was genuine cause for celebration at news of the latest takeover in the insurance arena, the third in the past couple of months.
The bid for Sedgwick comes hard on the heels of Friends Provident's agreed £744 million sterling bid for London & Manchester, the life assurer, launched only last week, and Kohlberg Kravis Roberts' bid for Willis Corroon last month. Dealers insisted there is more restructuring to come in the general insurance stocks.
Footsie hit its session high, 5,655.6 in mid-morning, as the build-up of takeover speculation was at its height. Although some observers remain wary of the extreme volatility in the British market, there are still plenty of market strategists who see good value in stocks.
Scottish Equitable Asset Management (SEAM) said yesterday that it had restructured its portfolios to "reflect a positive position on bonds in the UK and US markets" - funded from lower cash weightings - and said it expects both British and US equities to outperform cash, rebalancing its equity portfolios from a neutral to a positive position.
SEAM remains positive on the prospects for European equities but is underweight in Japan, the Far East and Latin America.
SEAM said it expects the British economy to grow by a little below 2 per cent this year and forecasts a "soft landing", with inflation at 2.8 per cent by the end of this year. It does not see a need for interest rates to rise from the current 7.5 per cent and said rates could begin to decline in the new year.
Just about the only disappointment was the low level of turnover, which at 6 p.m. reached only 725 million shares.
