The UK equity market is reacting positively to the performance of bond markets, which now believe that the US economy is beginning to slow, and that past fears about inflation were too pessimistic.
Equities are also benefiting from a generation of cash by the corporate sector, which is being distributed through dividend growth and acquisitions. (Take-over speculation is strong in the utilities and also in the food sector).
Finally the UK's shrinking Public Sector Borrowing Requirement has reduced the supply of gilts onto the financial market leaving funds available for equity investment.
Results due this week:
UK oil/chemicals sector 1994 final quarter results are led this week by British Petroleum today.
The impact of mild weather on gas sales and refining margins, is likely to have been offset by the strength of the upturn in the chemicals sector, and BP is expected to report sharply improved earnings.
The chemicals upturn reflects economic recovery and shortages of some products. BP also benefited from the recent surge in petrochemical prices.
Reuters, the international financial information and news group also reports today, and 1994 profits are expected to be 15% higher.