But the grudging German interest rate reduction killed the euphoria, and with many investors adopting the view 'it is better to travel hopefully than to arrive' a rush to take profits transformed a 26.3 gain to 2,900.1 into a 7.9 fall at 2,865.9.
But second line stocks, although below their best levels, still managed to achieve new closing highs.
Trading was hectic. It was the busiest day since last September's devaluation, with turnover stretching to almost 950 million shares.
The German cut will clearly do nothing to discourage further UK reductions. But the sharp advance shares have enjoyed this week anticipated a more decisive German move.
Interest rate disappointment was not the only influence. There was a growing belief as the index romped ahead that the advance was too quick, too steep.
Rights issue worries resurfaced, some big lines of stock came on offer and suddenly the temptation to lock in profits proved too strong to resist. Buyers, already questioning the inflated prices, were quick to withdraw as the selling pressure mounted.
Among the lines of stock seeking a home were six million British Airways, five million British Gas and 1.5 million SmithKline Beecham warrants. Five million Rentokil were placed at around 216p. The price fell 5p to 214p.
National Westminster Bank joined the rights issue candidates. The shares fell 21p to 460p. TSB Group, Wednesday's hot takeover tip, relapsed 8p to 169p.
There is a growing view that one of the clearing banks will produce the mega-cash call that is haunting the market. Lloyds Bank, still the favourite to absorb TSB, is regarded as the most likely to tap shareholders for cash.
But more and more are being recruited to the rights rumour mill. Grand Metropolitan, the food and drink group, up 10p at 450p, caused some speculation and Glaxo Holdings, down 10p at 655p, remained in the spotlight.
Kingfisher, for long regarded as a candidate, moved to the head of the queue following its pounds 1.25bn move to capture a French electrical retailer. Briefly down to 524p, Kingfisher closed 20p lower at 538p.
Some believe the mega issue is scheduled for next week with a call of at least pounds 1bn being prepared. Trafalgar House, although not in the pounds 1bn league, is thought to be set for a rights of up to pounds 400m.
Any issue would, presumably, be supported by Hongkong Land, which duly lifted its interest to 20.1 per cent as the mystery institution delivered the promised 5 per cent stake. The shares slipped 1.5p to 92p.
Stockbroker Panmure Gordon contributed to the sudden flurry of unease. It calculated that dividend cover for the FTA 500 stocks was only 1.8, lowest since records began in 1964. Historically cover was more than twice.
Panmure believes dividend growth in the next few years will be 9 per cent, lagging earnings as the economy recovers. The broker drew attention to water shares, mostly higher, where dividend growth remains attractive.
BPB Industries, the plasterboard group, edged ahead 5p to 219p, still drawing strength from an analysts' visit to its French operations. Tate & Lyle put on 4p to 418p on Hoare Govett buy support. Tadpole Technology improved another 23p to 349p, reflecting Wednesday's institutional meeting.
Marks and Spencer, although failing to hold its best level, ended 5p higher at 338p as this week's persistent buyer continued to make its presence felt.
Goldsmiths rose 2p to 40p. Hoare Govett forecast a break- even outcome this year and said the shares were 'undervalued'.
British Steel edged further ahead on US interest and lorry maker ERF motored another 24p to 255p, still responding to the DAF collapse.
Invergordon Distillers, the Scotch whisky group, rose 13p to 272p as talk revived of a new American Brands bid.
Hunting, the defence group, improved 8p to 223p. It has obtained the contract to operate the four Atomic Weapon Establishment sites. Although the fee was not mentioned, it is said to be 'significant' in relation to the group.
Armour Trust jumped 5p to 46p as a bid from Grand Central Investments, unchanged at 43p, grew more likely
Debt-laden MTM rose 1p to 14.5p. A Swedish investment company, AB Hebi, has picked up a 7.81 per cent interest, mostly from Richard Lines, the chemical group's founder who quit a year ago.
Acorn Computer romped ahead 39p to 116p as the market thought it detected more evidence that its new microchip was winning increasingly powerful support. Latest story is that IBM has been converted to the chip developed by a company in which Acorn has a 49 per cent interest. Acorn is a narrow market with Olivetti of Italy accounting for 79.8 per cent of the capital.
Motor World, running 180 car parts and accessories shops in the North, is coming to market next week. Yesterday stockbroker Beeson Gregory placed six million shares at 210p, raising pounds 12.2m and pricing the company at pounds 27.7m. In five years profits have risen from pounds 456,000 to pounds 2.29m. The placing cash will go towards paying off debts, reducing gearing to 12 per cent.Reuse content