The decision by the Bank of England's monetary policy committee to lift domestic interest rates by 25 basis points to 5.75 per cent held no terrors for London's stock market yesterday.
On the contrary, the increase was generally viewed as positive by the market, confirming the MPC's determination to stamp on any inflationary signals.
There have been plenty of indications of emerging inflationary pressures recently, including rising house prices, higher-than-forecast average earnings and stronger-than-expected retail sales.
Some traders noted the aggressively-worded statement accompanying the rise in interest rates which noted persistently strong domestic demand which could lift inflation above the British government's 2.5 per cent target.
That, it was suggested, might mean that the MPC could move rates up again in the near term, possibly as soon as its next meeting, scheduled for February 9th or February 10th. What did take the market by surprise and caused plenty of unease was news that Standard Life Bank had captured an 11.4 per cent of the UK net mortgage market since its start-up a year ago, some £4 billion sterling (€6.4 billion) worth of mortgages.
Although it took some time to erode sentiment in the banking sector, the damage was considerable, affecting Halifax and Alliance & Leicester.
The FTSE 100 index eventually settled a net 1.3 off at 6,531.5, having threatened the 6,600 level around midday and fallen to a low of 6,509.4 in mid-afternoon.
A burst of strength in many of the high-tech stocks, namely Photo- Me, now basking in the glow of an Internet-type rating, was offset by weakness in some of the traditional engineering stocks and the FTSE 250 finished 3.6 off at 6,528.5.
The FTSE SmallCap index closed 18.3 higher at a new peak of 3,193.7.
The Dow Jones Industrial Average kicked on a further 50 points in early trading yesterday, in spite of marginally higher than expected retail sales in December.
That news was seen as adding slightly to the pressure for a rise in US interest when the Federal Reserve's open market committee meets to debate monetary policy on February 1st or February 2nd. The US market began to lose momentum later in the session, however.
Adding considerable spice to the day's events in the stock market was another display of Internet frenzy, this time from Blakes Clothing, a former menswear retailer, now renamed e-xentric and the Internet vehicle for Hugh Osmond and Alan McIntosh, founders of Punch Taverns.
