The FTSE 100 index re-crossed the 4,900 barrier yesterday as London and the rest of the big European stock markets responded to the latest resolute performances from the recently-troubled Far Eastern markets.
But the market ran out of steam during the last hour of trading, with a bout of weakness in the Footsie future draining confidence in the cash market and triggering a minor sell-off.
Dealers said the market had reacted to vague talk of more problems emerging in Japan, extending the sequence of failures that has featured Yamaichi and Sanyo Securities, two leading stockbrokers, and the Hokkaido Takushoku and Tokyo City banks.
There were no problems emanating from the US either, with a sedate showing by Wall Street on Wednesday and the market closed for Thanksgiving yesterday.
Dealers expect the holiday period in the US to bring a much-needed period of calm to global markets. Although open for a half day today, volume on Wall Street is expected to be light.
Tokyo's 3.5 per cent rise, which took place against a background of continuing unease in the financial sector, gave an early boost to London, as did Hong Kong's reasonably steady performance.
Prior to the late slide, the market had drawn additional encouragement from a long list of generally positive company news reports, as well as a continuing buzz of expectation that further takeover bids or mergers could be about to emerge.
At the close, the FTSE 100 was left with a 2.2 fall at 4,889.0, having hit a session high of 4,913.6, 22.54 in mid-morning.
Second-liners under-performed the leaders for much of the session, but managed to hold on to their best levels of the day. The FTSE Mid-250 closed 6.5 up at 4,658.3. The FTSE SmallCap ended 3.9 firmer at 2,270.0.
The takeover speculation that has been among the main recent supports for British stocks erupted again yesterday with Vodafone, the cellular phones group and Commercial Union the subject of keen bid rumours.
Bids for Mercury Asset Management, Redland, Allied Colloids and Britton Group mean that more than £6 billion sterling will be injected back into the market in coming weeks. The takeover pot was kept boiling yesterday with Neepsend, the engineering group, announcing it had received a bid approach.
One area of disappointment was the life assurance sector which fell sharply in the absence of any takeover developments. Legal & General and London & Manchester both made rapid progress earlier in the week.
Activity in London was disappointing reaching only 700 million by 6 p.m., with that figure considerably boosted by Dresdner Kleinwort Benson's latest foray into the market to buy more Redland shares on behalf of its client Lafarge. The broker bought over 100 million Redland shares yesterday to add to the near 30 per cent stake acquired on Wednesday.
Trading was uncertain throughout the session as the City concentrated on the Department of Trade and Industry report into the 1986 Guinness scandal.
Stock in British Aerospace and Rolls-Royce accelerated after the German parliament approved European plans to buy the Eurofighter following months of uncertainty for the cash-strapped government. British Aerospace rocketed 36p to £16.28 while Rolls-Royce fell 2p to 234p on profit-taking.
The City's attention also focused on the utilities sector after United Utilities announced it was committed to a £6.50 rebate on all water bills in 1998 while reporting a half-year pre-tax profit of £233.6 million.
It also said it would continue to cut costs in an effort to save £40 million by 1999 and that it would be more prudent with its dividend increases. Shares were up 52p to 777p.
