A BATCH of generally comforting economic data coupled with relief over the performances in US and Japanese markets provided a much needed lift to the equity market.
There was an additional boost to sentiment here with news of more takeover activity, this time involving two more FTSE Mid-250 stocks, Allied Colloids and Unichem.
The takeover news involving those two companies followed in the wake of Wednesday's £3.1 billion sterling agreed offer from Merrill Lynch for Mercury Asset Management, which triggered a surge of bid speculation in the financial sectors.
Wall Street's strength on Wednesday, when the Dow Jones Industrial Average closed 73 points ahead, hurdling the 7,700 level in the process, was the initiator of the widespread strength across European markets.
They were also given a push by the near 3 per cent rise in Tokyo, although numerous other Far Eastern stock markets continued to lose ground - some, such as Hong Kong, Malaysia and Korea, by large amounts. London was given a further kick ahead in the early afternoon when the Dow opened sharply higher. It approached a three-figure rise not long after London closed.
Dealers, taken aback by the pace of the rally, said the market had found itself short of stock, specifically in the leaders. "There is still the feeling that the market will start to tick up in the run up to Christmas; perhaps we're seeing that already," said one trader.
The only significant cloud on the horizon was a big sell-off in Lloyds TSB shares, one of the prime movers in the substantial outperformance of the bank sector over the past couple of years.
The slide in Lloyds TSB came in the wake of a profit downgrade by ABN-Amro Hoare Govett, Lloyds TSB's own broker, which some viewed as possibly the first of many such moves in the stock and the sector. The reduction reflected the impact of the recent sequence of five UK interest rate rises. That news also had a big impact on Barclays.
Lloyds TSB's retreat was worth over six Footsie points, with Barclays adding a further two, although those losses were more than neutralised by the big rallies in HSBC and Standard Chartered, the two far-east sensitive banks, which between them accounted for 11.7 Footsie points.
A number of other results grabbed the City's attention with media and leisure group Granada taking the lead after a 35 per cent jump in profits to £650 million.
Profits from its hospitality arm grew 41 per cent and its media unit by 18 per cent but earnings from the rentals division fell 5 per cent. Shares jumped 43p to 843p.
Improving sales helped retail group Storehouse record a 7.8 per cent increase in interim pre-tax profit to £38.5 million, but the figures disappointed the City and after an early slide shares climbed back and rose 1/2p to 235 1/2p.
The news came as the group appointed a new head to the Mothercare chain as it faces increased competition.
BG, formerly known as British Gas, shrugged off a strong pound and broke even in the third quarter of the year, which is traditionally the firm's weakest period owing to slow summer demand.
Staying with the energy sector, electricity generator PowerGen rose 1p to 750p, after reporting a 12 per cent rise in pre-tax profits before exceptionals of £154 million, up from £138 million for the interim period in 1996.
The FTSE-100 drove confidently through the 4,900 level, finishing the day 78.3 up at 4,908.4. The FTSE Mid-250, stimulated by the takeover-related gains, pushed up 12.0 to 4,642.3. The FTSE SmallCap was left well behind, slipping 0.9 to 2,274.7.
Domestic economic details released yesterday showed M4 money supply up 0.6 per cent, in line with most forecasts, and third quarter gross domestic product up a revised 0.9 per cent, slightly below consensus.
