Reed said more than two months ago that circulation figures for the hotel and airline directories had been overstated between 1991 and 1996, and that advertisers would have to be compensated. The company kicked off a thorough investigation into the problems, but has so far been unable to give its shareholders an update on the charge to the year's profits, which could come to as much as pounds 200m-pounds 300m, according to analysts' estimates.
Reed followers said yesterday's fall from grace was also a reflection of a lack of news on European regulatory approval for the merger with Wolters Kluwer. News of problems from sterling's strength didn't help the share-price either.
Where dealers spurned Reed, Reckitt & Colman was wanted. Market makers smelt corporate activity and sent the shares up 70.5p to 956.5p. Some analysts said the household goods company was seeing some bid interest, with potential buyers including Colgate Palmolive and Unilever. Others thought the spurt had more to do with Reckitt's recent underperformance, with the shares falling in recent months from a high of pounds 10.27 earlier in the year.
Despite the excitement, the volume was low, and financial stocks saw most of the real money yesterday. Banks piggy-backed on speculation that ABN Amro was in talks about buying NatWest. Although Amro attempted to quash the rumours, saying they were "total nonsense", NatWest surged 22.5p to 925.5p. Royal Bank of Scotland joined the gravy train, up 29.5p to 720p. Another factor helping the Hong Kong-influenced shares in the sector was the Hang Seng's ebullient performance overnight. HSBC added on 77p to pounds 16.72, and Standard Chartered rose 39p to 750p.
Insurance companies were also in demand. Norwich Union jumped 25p to 393p; General Accident clambered on to the bandwagon and ended up 67p to pounds 10.78; and Commercial Union clocked up another 43p to 888p. Second- line insurance stocks followed the lead set by their Footsie peers. Independent Insurance, for one, improved by 35p to pounds 11.48.
Once the starting gun had been fired, Footsie won the race to break the 5,000 barrier within the first half hour. The rest of the day, there was no turning back, and the index cruised effortlessly to the finish, ending at a day-high of 5082.3, up 111.6 points.
The Monetary Policy Committee's decision to leave interest rates unchanged was a big factor in Footsie's exuberance. A positive opening on Wall Street also aided the index. Volume was a pretty impressive 937.9 million shares.
A clutch of buy-backs boosted sentiment. Reuters, which is returning pounds 1.5bn to shareholders, shot up 30.5p to 710p, and GEC edged up 13.5p to 403.5p after unveiling plans for a pounds 300m share buyback. Reuters was also buoyed by positive noises from brokers. Societe Generale and NatWest were both broadly optimistic, although Panmure Gordon only rated it a "hold".
Elsewhere, institutions visiting Geest, the food producers, bumped the shares up 9p to 391.5p. Analysts met the company the day before, which also massaged the price.
Meanwhile, good results from Denby Group helped the crockery and cookware company cook up a 12.5p rise to 155p. The group reported a 9.1 per cent increase in pre-tax profits to pounds 6.63m for the year to the end of September, and said its array of new products had boosted profits.
GUS, the mail order behemoth, also benefited from good results and shrugged off somewhat negative broker comment. The company ended the session 25p richer at 710p, after reporting a four per cent increase in pre-tax profit before exceptionals to pounds 237.5m.