Within minutes a 10.6-point fall was wiped out and by mid-afternoon the FT-SE 100 index index was sporting a 43.3-point gain. Best levels were not always held, but even so at the close Footsie was holding a 33.9-point gain at 3,176.2.
The German rate cut, of course, reduces pressure for increases in the UK and US and gives the dollar a much-needed breathing space.
Swollen by bed-and-breakfast and PEP deals, trading was the highest this year, with more than 41,000 bargains completed and turnover put at 972.4 million shares.
Again there were signs of some biggish programme trades, said to be related to year-end window-dressing.
Government stocks recovered from disappointment over Wednesday's £2bn auction, scoring gains of up to a point.
In such a heady atmosphere takeover speculation continued to play a leading role in share movements, with speculators seeking the next victims.
The expected arrival of Commerzbank, the German group, at the fund manager Jupiter Tyndall kept nerves taut in the financial sector. Jupiter gained 16p to 418p.
Attention turned towards Union, the old Union Discount, up 3p at 88p. The financial services group has attracted the attention of a US investment house, which has built a 3 per cent shareholding. The company has had a tough time, with its shares down from nearly 600p in 1990. Two years later they hit a 36p low.
Sun Alliance held at 326p. Transatlantic Holdings, the South African- controlled insurer, has sold 750,000 shares, pushing its stake just below the notifiable 3 per cent level.
When Transatlantic, run by the redoubtable Donny Gordon, lifted its interest above 3 per cent, it created quite a stir, with many wondering whether its muscle-flexing was the prelude to a takeover bid. But Mr Gordon remained a passive investor, unlike at Sun Life, where he led a campaign which gave him effective control.
After lifting the stake in Sun Alliance, the Capital & Counties property group controlled by Transatlantic, settled a £240m joint venture row with the insurance group. There were suggestions that his sharebuying was in fact aimed at concentrating minds on the legal wrangle rather than signalling a hostile bid for Sun Alliance.
Fisons, moving head office from Ipswich to London, continued to attract speculative support, up 1p at 181p. Smith & Nephew, 1p higher at 170.5p, took on the mantle of healthcare bid victim, with Seaq printing a near- 13 million share volume.
Medeva, which has romped ahead this month, dropped 8p to 207p as it became involved in a legal confrontation in the US with BOC, the chemical group, up 11p to 707p. SmithKline Beecham was hit by US selling, falling 8p to 494p.
British Petroleum rose 6p to 435.5p on indications its Colombian oil reserves could be greater than indicated. The reorganisation at Shell lifted the shares 10p to 715p.
Lasmo dipped 3p to 162p despite persistent rumbling that BHP, the Australian resources giant, plans to buy Enterprise Oil's 9.8 per cent stake and then bid for full control. Enterprise failed after an acrimonious struggle last year to absorb Lasmo.
British Steel jumped 4.5p to 160p following a positive analysts' meeting at which there were indications that recent US price cuts would not be held. Unilever firmed a few coppers following an investment meeting in Rotterdam.
British Aerospace held at 486p as it called for the second leg of its £383m rights issue; it was enough to lift its intended target, VSEL, 12p to 1,555p. Rival bidder GEC gained 4.5p to 298p.
Scottish & Newcastle jumped 15p to 529p as the much-debated bid for Courage and accompanying rights issue failed to materialise. Any deal could be some weeks away, industry sources believe.
Arjo Wiggins Appleton, up 10p at 254p, again caught the roving takeover eye and Inchcape continued to recover from its battering following poor figures, gaining 11p to 307p
Redland, the building materials group, was the worst-performing blue chip following its dividend cut. The shares dropped 22p to 445p.
The Ofwat water curbs failed to make much of a splash, with North West Water's customer payback and special dividend stealing the show. Its shares rose 15p to 543p.
Northern Electric gained 16p to 745p on the increasing likelihood of a showdown shareholders' meeting.Reuse content