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Last Updated: Friday, 17 March 2006, 16:47 GMT
Q&A: What's behind the FTSE's rally
The headquarters of the London Stock Exchange
The stock market is pushing towards its all-time high
The FTSE 100, London's premier stock index, has broken through the 6,000 level for the first time in five years.

BBC News looks at why this has happened and asks what the prospects are for an early climb back to its record high of 6,950, set in December 1999.

Why has the market rallied now?

This year has seen a lot of fizz in the stock market, thanks largely to a frenzy of merger and acquisition activity and a batch of strong company earnings reports.

Investors have also been drawn to the markets by the promise of capital returns from higher dividends or share buybacks.

The ongoing strength of oil prices has fuelled market heavyweights such as Shell and BP, while major mining stocks including BHP Billiton and Xstrata have had their market values boosted by strong commodity prices as emerging economies, led by China, feed an increasing hunger for raw materials.

Additionally, Friday sees the "triple witching" effect of the quarterly expirations of futures and options, which increases market activity.

Why does hitting the 6,000 level matter?

Stock markets are driven on sentiment and the 6,000 level is seen as a major psychological barrier.

Breaching this mark may give investors more encouragement to buy more shares and drive the market back towards its all-time high of 6,950.

If that happens the stock market will have finally recovered from the impacts of the dotcom bubble burst in 2000 and the devastating events of September 11, 2001.

What have companies learnt in the past five years?

The last time the market stood above 6,000 was in March 2001, when many firms were still overweight and in need of cost cutting and restructuring.

Since then many listed companies have undergone major restructuring as the global slowdown triggered by September 11 forced firms to tighten their belts.

This has left them leaner and meaner, with more of their revenues going straight on the bottom line as profit.

Higher profits mean better dividends and a greater incentive for shareholders to invest.

Additionally, these efficiencies have left companies with bulging war chests that can be used to snap up rivals or return to shareholders as dividends.

So where do we go next?

Onwards and upwards, it is hoped.

Many analysts are in agreement that the market still looks relatively cheap and is quite capable of adding another 500 points.

However, this is dependent on factors such as oil prices and future earnings.

Oil and commodity prices look set to remain high for now as global demand steadily increases, while the beleaguered retail sector could see a turnaround if a bullish stock market translates into another boom in consumer spending.

Meanwhile, interest rates are steady and are seen as having hit a ceiling at 4.5%.

The knowledge that rates are unlikely to rise in the near-term is another reason companies and shareholders are remaining positive.


MARKET DATA - 11:36 UK

FTSE 100
5429.64up
23.70 0.44%
Dax
5733.05up
19.54 0.34%
Cac 40
3784.02up
14.48 0.38%
Dow Jones
10403.79up
78.53 0.76%
Nasdaq
2273.57up
35.31 1.58%
S&P 500
1115.71up
11.22 1.02%
BBC Global 30
5707.15up
20.65 0.36%
Data delayed by at least 15 minutes

SEE ALSO:
FTSE stays the same after review
08 Mar 06 |  Business
FTSE breaks through 6,000 barrier
17 Mar 06 |  Business
FTSE briefly hits four-year high
23 Dec 05 |  Business
FTSE 100 index closes at 5,000
10 Feb 05 |  Business


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