The base rate move was seen as reducing the danger of an aggressive run of increases and New York, which seems to be enjoying one of its periods when it exerts a deep fascination for the stock market, put on a buoyant early display.
Financials were back in demand. They drew strength from the higher interest rates and takeover speculation.
Abbey National and Halifax, the building societies turned banks, took advantage of the 0.25 per cent base rate increase by lifting their mortgage rates 0.35 per cent. In brisk trading Abbey rose 16p to 859.5p and Halifax 6p to 735.5p.
Abbey was again influenced by the story that National Westminster Bank is on the prowl. Many are convinced the two have resumed talks.
The possibility of a deal pushed NatWest up nearly 50p at one time; the shares closed 43.5p higher at 780.5p. Royal Bank of Scotland gained 23p to 624p.
Insurances, awaiting Norwich Union, were in the money. Commercial Union jumped 29p to 701.5p and General Accident 20p to 913.5p. Nikko, the Japanese- owned securities house, believes Norwich will be a buy up to 327p.
It was as if the elements combined to generate heady activity among Footsie constituents. It was a blue chips surge with the rest of the market trailing in its wake.
Cable & Wireless was by far the best-performing blue chip, soaring nearly 15 per cent to 572p on its long-awaited Chinese deal over Hong Kong Telecom. In frantic late-afternoon trading there was a rush to climb on the Cable bandwagon with many investors encouraged by the even-handed nature of the HKT deal and the entry it provides for Cable in China. Seaq put turnover at nearly 24 million shares.
Lasmo continued to fight its way from the Footsie relegation zone with a 16p gain to 275p as the oil group's asset estimates were raised following its latest Venezuelan deal.
Rank's decision to bring forward the sale of its remaining 20 per cent of the Rank Xerox office equipment group produced a 26p gain to 448.5p. It should pull in around pounds 1bn with pounds 250m scheduled for a share buy back.
British Aerospace climbed a further 41.5p to 1,315p and National Power returned to winning ways with a 15p advance to 516.5p.
Bass, the brewing and hotel group, missed the party. It fell 19p to 754p as Merrill Lynch downgraded. This year's figure is thought to have been cut by pounds 6m to pounds 722m and next by pounds 12m to pounds 778m.
And poor old BTR remained the scene of abject depression. It is nearly the case of another day, another low. The shares achieved the dubious distinction of recording the worst Footsie fall, off 5p to 188.5p. The slide has already prompted calls for boardroom changes at the once highly regarded conglomerate.
Railtrack retreated a further 10.5p to 647.5p in the face of the Westminster furore and Scottish & Newcastle's near continuous slide from 700p went on with a 4p decline to 660.5p. Others under the whip and hitting 12-month lows included Albert Fisher, 1.5p to 36.5p, ML Laboratories, 4.5p to 174.5p and Storehouse, 3p to 191p.
FKI, the engineer, added 4p to 179p; Mercury Asset Management acquired 5.1 million shares, increasing its stake to 16 per cent. J Sainsbury shaded 2p to 349p with BZW said to be negative.
Goldsborough was the day's top performer, up 27 per cent to 172.5p following the pounds 76.7m Bupa bid. CNC Properties slipped 2p to 77.5p. On Wednesday it said it had received a bid approach; yesterday it said no offer had been received and it was not in talks which might lead to a bid.
Dragon Oil fell 0.5p to 2.25p. It is raising pounds 62.5m via a rights issue and intends to spend the cash developing interests in the Far East and Turkmenistan.
Bostrom, a vehicle components group, held at 281p as stockbroker Albert E Sharp made enthusiastic noises, forecasting profits up from pounds 5.85m last year to pounds 6.7m this and pounds 7.6m next.
ERA, the loss-making retailer, held at 5.5p. It has said disposals are under consideration. One suggestion is it intends to sell its Beatties model shops to Hamleys; the toy retailer unchanged at 285.5p.
Allders, the department store chain, held at 217p. Stockbroker Greig Middleton believes the shares remain undervalued. It expects profits to hit pounds 19m this year, up from pounds 11.4m, with pounds 22m likely next year.Reuse content