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Leading shares in London managed to end a very volatile trading day just in positive territory, but well off the highs seen in the first hour of Friday trading, as strong gains on Wall Street in early trade were offset by concerns about the effect of the 'triple witching' in the US later in the day and next week's Budget - which will lay out the government's spending and tax plans for the next year.
On Friday, the FTSE 100 index closed the day 0.8 points higher at 6,558, well above its session low of 6,504.1, but well off the 6,713.1 reached in the first hour of trading. The broader FTSE indices all ended the session in positive territory, with the techMARK 100 index falling back from its highs but still sporting a decent advance, up 60.58 points at 4,843.9, as Nasdaq's rally continued. Volume was a very solid 1.976 billion shares traded in 175,677 transactions - with Vodafone AirTouch again the biggest traded stock in the market, with nearly £222 million changing hands.
Blue chips stocks raced ahead in early deals, with the FTSE 100 index moving aggressively through the 6,700 level as the market reacted to the largest single day gain ever on Wall Street as investors piled into bombed-out "old economy" stocks. Technology stocks, which have been battered over recent sessions, also attracted a wave of fresh buying as fund managers used Nasdaq's dramatic recovery on Thursday as an excuse to move back into technology issues at the lower levels - with the bulls suggesting that selected stocks offer very good value at current prices.
The main focus in the afternoon session - the US February CPI data - proved to be something of a damp squib, with the core rate at 0.2 per cent coming bang in line with expectations. The slightly higher-than-forecast headline CPI rate caused some jitters, especially ahead of next week's key FOMC meeting, and prompted a slightly easier start to the new session on Wall Street. But, as the old adage goes - "you can't keep a good man down" - and within the first hour of trading in New York, falls on both the DJIA and Nasdaq were quickly reversed as US investors continued to pile back into equities.
At the close of London trading, the DJIA registered gains of around 92 points, with the tech-dominated Nasdaq up a further 85 points. "New economy" stocks sparkled again, helped by Nasdaq's firmness, as fund managers used the recent share price rout in the tech, media and telecoms as an opportunity to pick up stock at the lower levels. ARM Holdings put on 110 pence to 4,074 pence, with CMG 162 pence higher at 5,120 pence and Sage Group added 31 pence to 814-1/2 pence.
In a firm telecoms sector, FTSE 100 index heavyweight Vodafone AirTouch rose 18 pence to 369-3/4 pence, Colt Telecom added 954 pence at 3,455 pence, with TeleWest up 33 pence at 423-1/4 pence. Media stocks were also back in favour, led by Carlton Communications, 44-1/2 pence higher at 771 pence, with Daily Mail & General Trust up 53 pence at 1,224 pence, Reuters up 43-1/2 pence at 1,294 pence and BSkyB 60 pence firmer at 1,848 pence. But the buying spree was not confined to "new economy" issues, with selected "old economy" issues still seeing some good demand.
Reckitt Benckiser added 39 at 618, BAe Systems put on 16-1/4 at 435, and BAA firmed 17 to 427-3/4. GUS was among the biggest FTSE 100 fallers, shedding 43-3/4 to 4399-3/4, as WestLB Panmure repeated its "sell" advice on the stock, highlighting valuation factors and the lack of attractions from any possible disposal of its Burberry brand. BP Amoco fell back after a good run on the Arco assets sale confirmation, losing 14 to 554, though the market remains encouraged by comments from chief executive Sir John Browne that the oil company plans to launch a rolling share buyback programme.
Second-line tech stocks continued to lead the FTSE 250 index higher as Nasdaq extended the strong gains seen overnight, and ended decisively their three-
session losing steak - which some had feared could signal the end of the Internet bubble. Durlacher stood out from the pack, up 345 at 2,650, lifted as well by the news of the success of its on-line float of Bizzbuild.com. Redstone Telecoms firmed 95 to 807-1/2, while Parity Group added 54 to 511-1/2. Morse Holdings rallied 35 to 642-1/2 as sector watchers warmed to news of the appointment of a former leading light at mobile phone group Orange, Colin Tucker, to the company's board. Biotech groups also attracted fresh interest, with Celltech, up 72-1/2 at 1,307-1/2, still benefiting from positive comment from Goldman Sachs. The group is also understood to be doing presentations to a series of fund managers.
Robust full year figures and positive news on cost savings saw heating and building products group Hepworth close 8-1/2 higher at 163-1/2, with WestLB Panmure upgrading the stock to 'buy' from 'outperform' in response. Despite the impact of translating its euro-denominated profits into sterling, French-born chief executive Jean Francois Chene remains aggressively on the hunt for a "significant" acquisition in Europe - which could run into hundreds of millions of pounds. Chene's comments came as Hepworth reported a hike in 1999 pre-tax profits to £76.2 million from the previous £64.5 million, with the dividend rising to 9.5 pence from 9.25.
Shares in publisher EMAP saw gains of 94 to 1,410 as house broker ABN Amro and Warburg Dillon Read warmed to the group's Internet strategy - which was first detailed this week. ABN Amro reckons EMAP remains undervalued and set a share price target of 1,542 pence - of which 125 pence reflects the potential value of its Internet business.
Warburg was also a fan, advising clients buy the stock up to 1700 pence. But Next remained on offer, off lows but still down 15 at 555-1/2, as WestLB Panmure's highly-rated retailing team moved its rating to "neutral" from "buy" ahead of results next week, with the broker warning that there is room for disappointment within the figures. Shares in First Group were also marked lower, down 24 at 166, as the much-mooted link-up with rival National Express failed to materialise.
Trinity Mirror fell back, down 29-1/2 at 709, retreating from earlier gains, as its 3-year £150 million Internet investment programme failed to impress. The fear is that Trinity's move, which follows hard on the heels of rivals such as EMAP, Reuters, Pearson, BSkyB and Reed Elsevier, takes the newspaper publishing group into a market place that it already overcrowded by some of the media's big hitters. "Trinity Mirror has got valuable assets but others do as well," Salomon Smith Barney analyst David Forster said.
The news was accompanied by forecast-busting year to 2 January results, which saw pretax profits climb to 116 mln stg from the prior year's £73 million, and the planned £300 million sale of the Belfast Telegraph to Irish media magnate Tony O'Reilly - though regulatory hurdles still have to be cleared.
Shares in UK smaller companies rallied after recent sell-offs, outperforming the blue chip market in reaction to a fresh injection of interest in selected technology issues thanks to the extension of the recovery by the Nasdaq index. At the close, the FTSE Small Cap index was 34.5 points higher at 3,410.3 points, close to its best levels for the session at 3,413.5, and well off lows at 3,397.0. A bounce back by a variety of recently under pressure technology issues provided the main thrust for small cap issues. Retail Decisions, up 63-1/2 at 327-1/2 reflected a rally after recent hefty profit taking. Griff-Tech.com, up 3 at 22, Sopheon, ahead 167-1/2 at 1,217-1/2, and VoyagerIT.com, up 2-1/2 at 20, also recovered from recent profit taking.
Elsewhere, Fulcrum Pharm was a notable feature in, jumping 6-3/4 pence - or 44.26 per cent - to 22 pence on speculative interest. Speculation was ignited after an announcement by group that it had been informed that Everett Financial Management had acquired shares representing around a 20.2 per cent holding in the AIM listed business which it then sold on to its clients. London Pacific also attracted speculative interest, up 342-1/2 pence at 1,872-1/2 on rumours that the firm is close to some corporate action. The group was also in focus ahead of next week's 4 for 1 ADS split which will improve liquidity for its US basket.
Advanced Power Components was well-bid, 30 ahead at 307-1/2, after the group announced an ADSL line interface design development partnership with France's Alcatel. Infobank ended off earlier highs, but still gained 90 at 2,900 after its InTrade software product was adopted for the new integrated e-Purchasing solution being offered by Microsoft, Compaq and KPMG. In the wake of the news, WestLB Panmure repeated its £47 price target on the stock. 365 Corp was also higher after the Internet group revealed a new distribution deal with US portal giant Yahoo! But on the downside, Matrix Healthcare dropped 18-1/2 pence to 45 after its final results disappointed, with the nursing home group's outlook statement fairly gloomy.
Matrix said it expected the intense pressure on its operating margins to be maintained until there is a fundamental shift in government policy towards the sector. Haden MacLellan also suffered after results, shedding 4-1/2 pence to 52-1/2 pence, as full year figures were accompanied by news of the planned sale of its IS division, leaving the group exclusively focused on its fasteners operations.
Pegasus lost 125 pence at 850 pence with the resignation of further directors continuing as Freecom.net's agreed offer for the group progresses towards its conclusion. Freecom.net shares shed 45 pence at 387-1/2 pence in sympathy.
Please note that the value of investments, and income (if any) yielded by them, may fall as well as rise, and you may not recover the full amount of your original investment. Past performance is not necessarily a guide to the future.
James Dimech DeBono is a qualified accountant with a strong academic background in quantitative financial economics and a keen interest in investment management. He can be contacted by e-mail:
JamesDebono@CompuServe.com
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