Christmas all over again as the Footsie smashes 4,100 barrier

Click to follow
The Independent Online
The stock market looks set to end the year at an all-time high as the blue-chip FTSE 100 index powered through the 4,100 barrier yesterday to a record close. The pound was also in fine fettle yet again, hitting a four-year high against the Japanese yen at one stage and ending near its peak against the German mark.

Despite the likely impact of the currency's strength on overseas earnings, the Footsie shrugged aside thinly populated dealing rooms and two of the top 100 shares going ex-dividend to end 24.7 points higher at 4,115.7.

The index was fuelled by the breaking of new records on Wall Street, where the Dow was showing a reading 22 points higher as London closed. However, it closed down 11 at 6,549. The US market is now showing a gain of around 29 per cent on the year.

The final tally in London was well above the previous record of 4,092.5 set on Christmas Eve, although observers cautioned against reading too much into the move.

Steve Wright, a market analyst with brokers Barclays de Zoete Wedd, pointed out that volumes, with 421.5 million shares traded yesterday, were well below normal levels. He described it as an "end of year rally", with some of the institutions' cash positions being unwound. "Sentiment has been quite good in the last week or two that the market would end on a high. There has been a lot of corporate activity generating a lot of cash, which will be handed back to the institutions."

BZW is looking for the Footsie to end 1997 at 4,300, but Mr Wright said the current strength of the market was a selling opportunity. Utilities had recovered from the possibility of Labour introducing a windfall tax, but there could still be further shocks, he warned.

"I can see some of that nervousness coming back into the market if certain things are said by certain politicians, particularly over things like ACT [advance corporation tax]." Philip Isherwood of Kleinwort Benson Securities agreed that there was nothing fundamental behind yesterday's market strength.

"It's not a question of what's going on. It's a question of what's not going on."

The main story yesterday was the absence of selling pressure since London and New York survived key "witching hours" on the Friday before Christmas, when five different index futures and options expired simultaneously on both sides of the Atlantic. If the market had been vulnerable, it would have shown itself then, he said.

London's blue chips were led higher by British Aerospace, boosted by hopes that it would benefit from restructuring at the Airbus Industrie consortium. There was also a strong showing from the retail sector after good Christmas sales. The market's rise swamped the move ex-dividend by British Telecom and Severn Trent, which knocked 3.9 points off the index.

Meanwhile, sterling remained firm, ending marginally ahead at 195.90 against the yen and 70 pfennigs up on the mark at 2.6340. Against the dollar, the pound ended at $1.6905, up from $1.6881. Dealers said interest rate hopes continued to be behind the rise, although volumes traded remain thin.