Leading UK equities traded brightly yesterday with dealers adjusting to a two-day slide that had seen the blue-chip index fall about 200 points from its intraday peak. Footsie opened 12 points up on the previous day's close and maintained a firm trend. Then, support in the afternoon from a strong start by the Dow Jones Industrial Average, gave another lift which saw the UK index close 41 up at 4,846.7, just below its high of the day.
The second-line indices were less fortunate. The FTSE 250 was marginally weaker, ending 2.3 lower at 4,461.8, and the SmallCap was only up 0.5 at 2189.0.
Turnover by 6 p.m. had reached 879.3 million shares with 56 per cent of the volume traded in Footsie stocks.
It was helped by massive putthroughs in GrandMet and Guinness as Mr Bernard Arnault, the chairman of LVMH, shifted holdings in the two companies in what was seen as an attempt to destabilise their merger plans. Market nerves were steadied from the outset by Monday night's close on Wall Street, as well as an International Monetary Fund report which said UK rates might need to rise less than commonly expected to prevent the economy overheating.
Both equity and government bond traders largely ignored the impact of sterling, which was moving up towards levels not seen on the exchange rate index since the Gulf war seven years ago. Footsie rose smartly to record a 30-point improvement during the morning as institutional investors and marketmakers began to discount the impact of any negative repercussions from last night's Humphrey Hawkins testimony in the US.
In December, when Mr Alan Greenspan, the chairman of the US Federal Reserve, last commented on the state of the economy, his remark about "irrational exuberance" in financial markets prompted steep slides in equity prices.
In the afternoon, the Dow was up smartly during New York's first hour of trading in spite of a sharp fall in IBM, prompted by the company's interim earnings figures. That strength gave scope for further gains in London.
