Another strong performance by international markets helped lift the FTSE All-Share index to an all-time closing high yesterday, as share prices resumed the positive trend they had displayed for most of last week.
European stock markets were helped by a stronger dollar and by expectations that interest rates in some countries will fall as rates equalise across the continent in the run-up to Economic and Monetary Union.
Meanwhile, Wall Street opened strongly again with the Dow Jones Industrial Average mounting a successful attack on the 8,000 level in early trading, as optimism continued to grow about the prospects for interest rates in the US. The Dow was about 100 points ahead at the London close.
London had its own source of support as speculation that the UK might join the second wave of EMU lifted gilts. The benchmark 10-year issue was around a third of a point higher.
The FTSE 100 index started on a subdued note, dropping nine points to 5,014.8 after the first five minutes of trading. But buyers came in to push the December future higher, dragging the cash market up with it.
Footsie finished at 5,075.7, up 51.9 points on the day and just 11 short of its closing peak of 5,086.8, set on August 7. However, the small and medium-sized companies lagged the leaders. The FTSE 250 index rose only 6.0 to 4,707.2, with stocks such as biocompatibles taking a battering, while the SmallCap index gained just 3.1 to 2,296.8.
But the weight of Footsie stocks in the all-share meant that the broadly-based index set both alltime closing and intraday highs. The all-share closed at 2,381.51, up 19.2 having been as high as 2,382.2 at one stage.
The outperformance of the leading stocks may have been a sign that international investors were dipping their toes into the UK market; sterling was 2 1/2 pfennigs higher yesterday.
"The relative position of the UK market has been improving, especially in a European context," according to Mr Richard Kersley, head of European strategy at BZW. "The signs are that interest rate expectations have been improving and that is helping interest rate-sensitive stocks."
Food retailers featured prominently among Footsie's best performers yesterday on the back of broker upgrades.
But some analysts remain cautious about the outlook for corporate earnings. In its latest quarterly note, ABN Amro Hoare Govett said that "the war of attrition on non-financial earnings will continue; the fall in expectations for this year which preceded the results season was not the last skirmish". "Sterling is unlikely to fall enough and the upside pressure from pay costs is too great for earnings expectations for 1998 not to be dashed also," added the broker.
Volume was higher than on previous Mondays, with 720 million shares traded by the 6 p.m. count, of which 52 per cent was in non-Footsie stocks.
