The UK equity market was yesterday showing unmistakable signs of establishing a positive trend, with its third rise in a row.
The FTSE 100 index was in positive territory all day, recording a 45-point gain mid-morning and ending the session a net 11.7 up at 6,391.0. The pull-back from the earlier high was not representative because Vodafone closed lower and was responsible for 27 points of the potential gain for the main index.
Footsie outperformed indices in France and Germany, and turnover was significantly higher than it has been recently. Overall volume, which had been languishing at about 1.2 billion shares, was up at 1.56 billion by 6 p.m.
The activity was in heavyweight sectors, with oil stocks rising on buy-back prospects and the latest hike in oil prices, and pharmaceuticals responding to a positive news flow.
Traders who have been wringing their hands at the lack of activity in the past fortnight and the reduced volatility of the past few months were almost tempted to see signs of a break-out.
"Footsie is trying very hard to go higher, but it is a slow process," said one dealer.
Early gains partly reflected the CBI'S latest distributive trades survey, which reported that growth rates were lower in July than in April and May.
The cooling of retail sales growth comes just ahead of today's interest rate decision by the Bank of England. The latest move by the monetary policy committee will take on extra significance because it is accompanied by the production of the bank's quarterly inflation report.
A recent poll showed that 75 per cent of economists asked expected rates to stay flat, but there has been a growing chorus of dissent.
Even if the climate remains benign, the UK equity market has a lot of ground to make up. As the third quarter starts to get under way, figures for the first six months from Deutsche Bank show just how badly it has done. Investors have seen their holdings fall 7 per cent this year, while cash has gone up 3.5 per cent.
The FTSE 250 fell 4.3 to 6,747.2 despite a flurry of activity in the water sector following the bids for Hyder. The SmallCap index lifted 5.6 to 3,386 and the TechMARK fell 7.96 to 3,567.38.
