British stocks shrugged aside Wall Street's fairly steep slide on Tuesday and a further early bout of weakness in US stocks yesterday, preferring, instead, to react to hints of a small buy-side trading programme.
Adding backbone to a market that has been shaken by worries about possible interest rate rises in Germany, the US and Britain, was a fresh frisson of take-over speculation.
This ran through the banks, insurances and leisure areas of the market, although the take-over stories were described as being of "relatively low quality as far as bid rumours go", according to one market-maker.
He also pointed out that the gains were generally confined to the leading stocks. The second-liners and smallcap issues were virtually ignored throughout a session which saw turnover struggling to top 600 million. At 6 p.m., overall volume reached 614.9 million.
At the close, the FTSE 100 index posted a 20.6 gain at 4,906.9, halting a sequence of two successive downside performances.
The FTSE Mid-250, on the other hand, never looked comfortable, quickly relinquishing an early small gain and ending the day 0.4 off at 4,649.6, having slipped to touch a session low of 4,647.1.
Similarly, the FTSE SmallCap index languished all day, closing 0.3 down at 2,252.8.
The day began with share prices on the slide and apparently friendless, with market-makers, anxious to drum up business, clipping their initial prices in an attempt to coax buyers back into the market.
The day's economic news, global trade figures for June and non-EU trade numbers for July, played no real part in determining stock market trends, and had little impact on gilts which were marginally easier over the day.
No real support was forthcoming for the leaders, but sentiment in the market began to change in the late morning in response to the talk of a small buy programme encompassing the FTSE-100 stocks.
Thereafter, Footsie managed to cling on to its gains, although it ended well below the session high of 4,920.3, up 34 points, recorded shortly after the US market kicked in.
The Dow Jones Industrial Average, which posted a 77-point decline overnight, resumed its downward path yesterday. A brief uptick was soon wiped out and replaced by a 50-points slide after a few minutes.
Global markets have been affected by concerns that German, US and, possibly, British interest rates may be on the way up. Germany's Bundesbank council meets on September 4th, Britain's monetary policy committee on September 11th and the US Federal Reserve's Open Market Committee on September 30th.
The UK economics team at Merrill Lynch said in its latest note; "The pace of consumer demand growth is too fast for comfort and signals the need for, and likelihood of, further base rate increases. We are certainly not in the camp that believes that 7 per cent is the peak for base rates."
