A BETTER feeling was evident in the British stock market for much of yesterday, with many dealers and institutional investors adopting the view that interest rates in the US and Britain will be left on hold for the time being.
Sentiment deteriorated during the last hour of trading, however, as the Dow Jones Industrial Average posted a near-30 point shortly after the opening on last-minute jitters about US rates
The two-day meeting of the US Federal Reserve Open Market Committee began yesterday, while Mr Eddie George, governor of the Bank of England, is scheduled to meet Mr Kenneth Clarke, the chancellor, today.
Apart from a bout of profit-taking in the British Digital Broadcasting alliance stocks, which have spiralled higher since last week, and currency-related selling of the drug stocks, most of the big sectors put in solid performances yesterday.
Responding to flurries of buying, the FT-SE 100 index pushed up to a new intra-day peak of 4,276.3 early in the day, but came under pressure late in the session to end only 3.1 ahead at 4,260.9. There were no worries for the smaller stocks with the SmallCap index extending its recent strong performance, climbing a further 5.9 to a record close of 2,314.1, after touching an intra-day peak of 2,314.2.
But the FT-SE Mid-250 index was burdened by a steep decline in Pace Micro, after a disappointing trading update, and by a bout of profit-taking in some of the biotech and housebuilding stocks. The latter was the best performing sector during January, giving a total return of 13 per cent.
Among biotech stocks, Biocompatibles gave back some of the big gains of the previous two sessions which had been prompted by a broker recommendation. At the close, the FT-SE Mid-250 index was clinging on grimly to a 0.7 gain at 4,575.6.
Dealers were relieved at the increase in the level of business yesterday, compared with Monday when turnover of 723 million shares translated into retail business worth only £503.6 million sterling, according to figures from the stock exchange. Turnover at the 6p.m. count was 853.1 million shares.
Activity is expected to expand rapidly in the coming weeks as cash from investors in PEPs (personal equity plans) finds its way into the market.
Sterling's good showing yesterday - it was up sharply against the dollar and the D-Mark - helped to take some of the shine off the market, particularly the big pharmaceutical stocks.
