THE emergence of a fresh flurry of institutional buying interest, said to have come from funds running underweight positions in stocks, provided just the boost the British market needed and drove the two leading FTSE indices, the 100 and 250, to record closes yesterday.
This demand was said to have caught marketmakers short of stock and prompted a general scramble among the big trading houses to replenish their depleted books.
There was also talk of a big trading programme, heavily weighted on the buy side, although most market makers said the story was just a rumour and not borne out by close scrutiny of turnover.
The FTSE loo index raced up to close 50.6 better at a new closing record of 4,357.7, only 4.7 away from its all-time intraday peak. Similarly, the FTSE 250, although underperforming the leading index, still managed a 12.1 gain at a new closing high of 4,666.6, only 8.6 off its intraday record.
The FTSE SmallCap, which has outpaced both the 100 and 250 over recent weeks, made progress, albeit on a lesser scale, finishing 1.8 higher at 2,353.2.
Initial impetus came from Wall Street's rally on Monday, when the Dow Jones Industrial Average turned an early near-50 point slide into a closing gain of 41 points. The Dow kicked off uncertainly yesterday, but picked up after London closed.
Traders said Wall Street's recovery came amid lessening concerns about the short-term outlook for US interest rates. Monday's US economic news was said to have slightly reduced the chances of a rate rise after the next Federal Reserve open market committee meeting, scheduled for March 25th.
A further test for the market will come on Friday when the February US non-farm payroll report is published.
This morning brings the regular monthly meeting between Mr Kenneth Clarke, the Chancellor of the Exchequer, and Mr Eddie George, governor of the Bank of England.
Strategists said London would obviously respond to US trends, but pointed out that the UK had not fully followed Wall Street's upward move and could withstand a sell-off across the Atlantic. "London is more firmly based and there is also the possibility of more takeover activity in the short to medium-term," said one specialist.
He still felt that Footsie had the potential to run on to 4,400 and possibly beyond that figure, "if the gilts market holds up at current levels".
But he also warned about the potential for more currency-induced profit warnings and earnings downgrades.
Turnover reached 839.8 million at the 6 p.m. count.
