THE UK's FTSE-100 index of leading shares rocketed through 5900 yesterday - a level not surpassed since June 2001 - amid more multi-billion-pound takeover action and hopes of large returns of cash by companies to investors.
It hit an intra-day high of 5924.5 points but cooled late in the session to finish at 5897.8 - up 39.1 points on the day and the highest close for nearly five years.
Fund managers cautioned the FTSE-100 was due a "rest", after a very strong run, but still saw value among some telecoms and banking stocks. Some market players believe the FTSE-100 may test the 6000 level in the near term, given its momentum.
The Organisation for Economic Co-operation and Development, meanwhile, painted an upbeat picture of the global economic backdrop. It said the UK should continue to grow around its potential rate, predicted a strong rebound in US growth in the first quarter, envisaged "continued dynamism" in a revived Japanese economy, and expected some improvement in the eurozone in the first half.
Mobile phone giant Vodafone was driven higher by the City yesterday - as investors hoped a special dividend would follow any sale of a stake in its Japanese arm.
Vodafone was also boosted by Verizon Communications' comments that it was working to buy the UK company's 45-per cent stake in their Verizon Wireless joint venture, after news of US rival AT&T's blockbuster dollars-67bn (GBP38bn) takeover of BellSouth Corporation. Vodafone has said previously it has no plans to sell this stake.
Germany's Linde yesterday announced an GBP8.2bn agreed takeover of UK industrial gases company BOC. This deal did not boost BOC's share price, but provided more grist for the takeover mill.
The FTSE Mid-250 index hit an intra-day record high of 9580.5 - before closing 73.7 points higher on the session at 9546.0.
Among surging second-line stocks was Greenock-based British Polythene Industries, up 37.25p to 590p on strong full-year results.
Graham Campbell, UK fund manager at Edinburgh Partners, said: "The (UK stock) market has risen by 20-per cent (in the) last year, which is more than earnings in most cases, so values are becoming stretched. There is still some value. We have invested in telecoms and banks."
He cited Vodafone, Royal Bank of Scotland and Northern Rock as examples of reasonable value.
However, Campbell said the market was "very frothy" given takeover speculation, the "huge cyclical uplift" for oil stocks, and share buy-backs and special dividends and added: "Overall the market is looking increasingly expensive."
Mike Balfour, chief executive of Glasgow Investment Managers, said it had done research which showed equities remained cheap relative to bonds, but added: "I think the market is definitely due for a rest."
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