British shares staged a good recovery from another sharp sell-off yesterday to finish the session with a minor overall gain amid considerable relief over last month's inflation data. Before the news on price rises, the stock market had fallen sharply along with most European markets in the wake of the overnight decline on Wall Street and a rather unhappy display by Asian markets.
But publication of the March Retail Price Index data, showing headline inflation at 3.5 per cent, up 0.1 per cent on the February figure, and core inflation at 2.6 per cent, a mere 0.1 per cent above the government's target, brought about a gradual recovery in market sentiment.
It was also helped along later in the day by a strong start to the US trading session. The Dow Jones Industrial Average kicked off on a firm note, moving up to post a 30point gain shortly after the opening bell.
"The RPI news was a big help; at one point it looked as if we were in for a rough time," said one dealer. At the close the FTSE 100 just managed to scramble into positive ground, finishing the day 0.9 higher at 5,955. Earlier, the index tumbled sharply, falling below the 5,900 mark and eventually bottoming out at 5,884.8, down almost 70 points, before responding quickly to the up-trend on Wall Street.
There had been additional pressure brought to bear on London from the stronger-than-expected growth in German M3 money supply, which restarted talk of a rise in German interest rates in the near future and drove the Dmark up sharply against the dollar.
Once again London's second-liners and small-caps were insulated from much of the weakness in the leaders, because of their relative under-performance against the FTSE 100 constituents so far this year. The FTSE Mid-250 never really threatened to drop into the red, and built gradually on a modestly firm opening to end the session up 16.5 at 5,543.4, only 14 points off its previous closing record.
The FTSE SmallCap gained 3.9 at 2,631.0, less than 10 points away from its record close.
In its latest research, The technical team at Robert Fleming Securities described London's performance this year, up about 17 per cent relative to other European markets, as "nothing special", pointing to a 25 per cent rise in Germany, a 28 per cent gain in France, and 40 per cent-plus rises in Italy and Spain.
