The FT-SE share index ended up 8.3 points at 2,378.3. Yet it spent most of the session in negative territory, at one time down 78.7 at 2,291.3.
A day of high drama had opened with sterling under intense pressure and shares in ragged retreat. Then came the 2- point minimum lending rate increase and Footsie slithered to its lowest level. Notice of a further 3-point advance produced a sudden conviction that devaluation was imminent.
Such a move would benefit internationals, particularly those with a big US exposure.
The great devaluation gamble was under way. Fund managers and securities houses started nibbling at internationals, ranging from the food and drink group Allied-Lyons to the drug maker Glaxo Holdings.
With overseas investors joining in, the revival gathered strength and the staggering turnaround occurred. Footsie went into plus ground, then found the effort too much and fell back before ending with a flourish.
The gamblers have time on their side. The next account day is not until Monday week.
The devaluation story took several forms. Besides a realignment within the ERM there was talk of the UK abandoning the union altogether or merely decoupling for a time until sterling found a more realistic level.
If sterling was devalued the dramatic interest rate increases could be unnecessary. They could quickly be reversed with, perhaps, an 8 per cent base rate by the year-end.
Rumours that the Germans planned another, more decisive interest rate reduction also helped spur the revival, as did talk that the second 3-point leg of the interest rate rise would not be implemented.
In the swirling mist of deep confusion, trading was often brisk, with market makers, as baffled as their stockbroker customers, desperately taking evasive action but often caught on the hop.
Turnover was above 600 million shares for the first time for months. But the bargain level remained subdued at 22,530.
With sterling in disarray, more bedlam is expected today and at least until the impact of the French Maastricht vote on Sunday is absorbed. Some securities houses are considering manning their dealing desks on Sunday evening as the first clues about the referendum decision come through.
It was widely believed that any strength the market would draw from a 'yes' vote would be short-lived unless sterling's value was dramatically changed, even if it remained in the ERM. A 'no' vote could prompt a sharp fall.
Some were talking of yet further interest rate advances today or tomorrow if the Government remained determined to ignore the calls for devaluation.
Allied-Lyons, at one time down to 526p, ended 19p higher at 564p; Glaxo, down to 761p, closed at 799p, up 23p.
But it was almost as if there were two markets - the booming internationals and the blood- splattered remainder.
Building, building material and other interest-rate-sensitive shares were the main casualties. Stores had to contend with the additional discomfort of The Body Shop International, down 108p to 158p on the surprise profit warning. At one time the shares were down 140p.
Banks were hit on bad-debt fears. IBCA, a credit rating agency, said that if high rates lasted for long banks could suffer trading losses and would be 'severely constrained' in passing on the increase.
But in the mayhem Fisons stood out, resisting the market fluctuations to hold a gain. At the close it was 9p up at 175p. Takeover rumours caused the strength, with the Swedish Astra group and Imperial Chemical Industries, up 13p at 1,067p in the dollar rush, named as the most likely predators.
In an oil sector helped by the devaluation talk and a pending Opec meeting seeking higher crude prices, Enterprise Oil was outstanding. In busy trading the shares jumped 29p to 365p. Some suspected bid action but Enterprise announced in the US that it intended to raise dollars 127m through a preference issue. On such an eventful day downgradings were largely ignored. But the food group Unigate suffered a 17p fall to 193p as Kleinwort Benson slashed its forecast for this year by pounds 11m to pounds 88m and next year's by pounds 12m to pounds 98m.
Racal Electronics, on its Chubb demerger, lost 2.25p to 63.75p and Commercial Union fell 8p to 475p as the Sun Alliance stake hovered.
The FT-SE share index swung between a fall of 78.7 points and a closing gain of 8.3 at 2,378.3. The FT 30-share index ended 9.3 points down at 1,716.4. Turnover reached 640.3 million shares, the best for months, with 22,530 bargains logged. Government stocks were confused, ending with falls of about pounds 1
Simpsons of Cornhill, the restaurant group that recently beat off a challenge from 'rebel' shareholders, is buying an Oxford restaurant for pounds 255,000, satisfied by 796,875 shares. It is assumed the vendor, Gillport Hotels & Catering, supports the Simpsons board. The 'rebels', led by Robert Klapp, must think so; they are trying to block the deal. Simpsons held at 32p.
Shares of Airtours, the package holiday group, largely ignored yesterday's turbulence, ending 4p lower at 185p. Hoare Govett remains keen on them. It expects profits of pounds 36m (against pounds 27.5m last year and only pounds 6.3m the year before) and a dividend jump from 5.75p to at least 7p. The shares were last year's best performers. They have been as high as 337p this year.Reuse content