Market report: Banking on independence, Footsie scales new peaks

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The Independent Online
Only two working days under Labour and Footsie has soared 74.3 points to a 4,519.3 peak.

Yesterday's surge was spurred by the changes at the Bank of England which prompted gilts to prosper, a lower-than-expected interest-rate increase and yet another rip-roaring performance in New York.

The dramatic thrust through 4,500 takes Footsie beyond the spring-time projections and close to some optimistic year-end forecasts.

Footsie has risen 93.4 points since John Major's election call and, incredibly, has made progress in 14 of the last 15 sessions.

The level of independence given to the Bank sent government stocks romping ahead by approaching pounds 5, their best display for years. The move to allow the Bank to set interest rates was viewed as helping to counter fears the Government's big majority could lead it into spendthrift ways.

Many had expected the Chancellor Gordon Brown to opt for a debut half- a-percentage-point interest-rate increase. Although the bank is likely to lift rates again in the next few weeks the modest interim measure had been discounted.

Against such a background, further enhanced by encouraging company results and prospects, it would have been astonishing if shares had not responded. But there was talk blue chips had got ahead of the game.

New York's resolute advance, should it continue, would drive the stock market further ahead. But with sterling again moving forward and increasing the pressure on exporters and international groups, more interest-rate increases in the pipeline and Mr Brown set to lift taxes, probably tinkering with ACT, some market men were decidedly jittery about the future direction of shares.

"The market has peaked; it is now a screaming sell," said a trader at one leading American investment house.

If he is right it could mean the adage advising investors to sell in May and buy again on St Leger Day will produce rich rewards this year.

The latest advance was, for once, not confined to blue chips. The supporting FTSE 250 index put on 22.1 points although it is still a considerable distance from its peak level.

Privatised companies were, in the main, in a more confident mood than on Friday with most managing to attract plus signs. Railtrack, however, was shunted 12.5p backwards to 424p and BG, on the surface, suffered a 10.5p fall to 171p. But the shares had to contend with stripping out a 10.13p dividend payment.

Reed International, celebrating a $30m five-year link with Microsoft, added 15.5p to 590p. Last night it met fund managers at a dinner, hosted by Henderson Crosthwaite at London's Savoy Hotel.

BTR rose 6p to 267p, helped along by Credit Lyonnais Laing support. The investment house believes the shares are on a "significant" discount to a sum-of-the-parts valuation and the group's new strategy will "reverse the share price underperformance of the last three years". Profits are expected to advance from pounds 1.25bn to pounds 1.33bn this year and then to pounds 1.44bn.

Cobham, the engineer, firmed to 631.5p following an analysts visit and British Steel shrugged off sterling's strength, improving to 148p on US support. BAT Industries, following the latest twist in the US tobacco litigation which powered Wall Street higher on Monday, gained a meagre 12.5p to 534p.

Yet another profits warning from Wace, the printer, sent the shares crashing 33.5p to 41p after 34,5p. Last year they were 279p.

British Petroleum produced better-than-expected first-quarter figures and, despite the declining crude price, gushed 29p to 732.5p; BSkyB, nine- month results today, gained 28.5p to 595.5p on expectation the figures will be accompanied by details of its digital television venture with Matsushita of Japan and BT. Cable and Wireless put on 12.5p to 482p; there is talk it is at last near to completing a deal over its HongKong Telecom off-shoot.

Financials were again strong with Barclays up 46.5p to a 1,191.5p and National Westminster up 23.5p to 751p.

Whitbread, on talk of non-core asset sales, gained 21.5p to 790p ahead of figures today.

High flyer PizzaExpress came a little nearer earth, falling 12p to 652.5p as the US Janus Capital fund appeared to cut its stake from 16.9 per cent to 15.27 per cent.

Newcomer Salehurst, a paper supplier, traded at 124p from a 117p placing and on Ofex Energiser, the health food business, jumped 50p to 850p.