US rate cut buoys demand

Technology stocks, depressed on Tuesday by a warning from Cisco, rebounded yesterday to become the centre of attention after the US Federal Reserve's unexpected cut in interest rates by half a percentage point to 4.5%.

Investors moved back into the market, throwing aside their earlier caution ahead of more heavyweight corporate news. As many as 1,000 US firms are slated to announce results this week and reports from key European companies, including software company SAP and mobile firms Nokia and Ericsson are also expected.

The FTSE 100 closed 129.1 points higher at 5,890.2, after touching a six-week high of 5,902.6 following the news on interest rates. The Techmark 100 index surged 147.14 points to 1,984.23 - its strongest close since the end of March.

Shares in software group Sage rose 52p to 278p and Misys - which announced after the markets closed on Tuesday that its outlook for the year to the end of May remained in line with market expectations - added 104p to 568p.

Microchip designer ARM Holdings climbed 70p to 378p. The firm was buoyed by better than expected results from computer chip maker Intel. Intel reported a decline in earnings but said business was improving, despite the slowing US economy.

Dimension Data, the South African computer networking company, also rose, gaining 41p to 300p.

Telecoms stocks shared in the improved sentiment. Mobile phone firm Vodafone saw demand for its stock, which climbed 14.75p to 224p, and telecoms equipment maker Marconi jumped 45p to 365p.

Media stocks were also in demand. Granada rose 19.5p to 181.25p and Pearson bounced up 159p to £14.44, regaining some of its recent losses.

Defensive stocks such as oil and drug companies, which had declined during the day, were further out of favour after the US central bankers reduced rates. Shell dropped 22.5p to 555.5p and BP Amoco shed 14.5p to 592.5p. Oil prices were also pushed down because of an excess of oil in the US, where reserves reached their highest levels in 20 months.

Shares in pharmaceutical companies also dipped. GlaxoSmithKline lost 62p to £18.08 and AstraZeneca was off 45p at 3395p.

Elsewhere, supermarket group Tesco saw its shares inch down 1.75p to 255.5p after a single block of 100m shares was dealt. The trade represented 1.4% of the company's share issue.

Associated British Foods rose 4.75p to 433.25p after reporting a 12% rise in half-year profits and said current trading was in line with its budget.

Avis Europe yesterday became the latest company to voice concern about the impact of the foot and mouth crisis. The car hire group saw its shares fall 13.25p to 139.75p after saying the UK market was showing some signs of slowing - fewer tourists were renting cars to drive around Britain in the wake of the crisis. The company said overall revenues generated by travellers from the US in the first quarter were in line with expectations but it remained cautious about demand from US customers. The US generates about 10% of the company's annual revenues.

Blacks Leisure Group , the sportswear retailer, also had a bad day and its suffering was at least partly caused by the knock on effects of foot and mouth. The company saw its shares fall again after reports cast doubt on its planned management buyout. The management team is apparently having difficulty in raising finance for its offer, partly because the foot and mouth crisis has depressed demand for camping goods. It dropped 2.5p to 172.5p.

Shares in Air Partner , the corporate air charter broker, were 57.5p lower at 320p after warning that a slowdown in British trading was expected to significantly reduce profits in the current financial year. The shares probably still have further to fall, according to analysts.