RENEWED uneasiness about Wall Street and bearish comments about German interest rates led to another unsettled performance by British stocks yesterday. The Dow Jones Industrial Average fell through 6,000 shortly after the London market closed.
Comments from Bundesbank economist Mr Otmar Issing that German interest rates had no further to fall upset sentiment across global markets. Shares in Frankfurt and Paris fell by more than 1 per cent.
There had been good early support for the equity market from gilts, which managed to post small gains at the long end of the market in the wake of lower than expected retail sales for September. But that market, too, came under late pressure with the 20 year gilt 6ff a net five ticks.
Retail sales for last month fell 0.3 per cent, giving an annual increase of 3.5 per cent, against consensus forecasts of a flat figure for the month.
The London market was burdened by strong rumours, which hit the market just after midday, of a big placing, or bought deal, with one of the biggest securities houses said to have put its sales force on alert for a sizeable deal involving BSkyB. Reports came in subsequently of a share issue from News Corp, exchangeable into BSkyB stock.
At the close of trading, the FTSE 100 fell 28.8 to 4,028.4, well above the session low. The weakness in the leaders spilled over into the rest of the market, where the FTSE Mid 250 settled 21.6 off at 4,431,1. The FTSE SmallCap index, meanwhile, closed 7.1 down at 2,184.0.
Analysts were nervous that markets on both sides of the Atlantic were due for a drop after their recent strong run. "The talk around the market is that Wall Street might be in for a 200 point fall, which would translate into a 100 point plus slide in London," said one strategist. He added however, that such a fall would provide an ideal buying opportunity for funds running underweight positions.
Of the big winners in the FTSE 100, Cable & Wireless remained at the forefront, still being lifted by the proposed creation of C & W Communications, a deal widely applauded around the City and in the financial press.
Shell Transport continued to reflect the market's belated response to much better than expected third quarter numbers from US subsidiary Shell Oil. Oil stocks were among the best performing sectors in London, with BP and Enterprise also attracting big support. Lasmo, on the other hand, was affected by a big selling order.
Water stocks were heavily traded, with one institution said to have switched out of Severn Trent and into South West Water ahead of an expected statement from the Monopolies Commission regarding bids for South West from Severn Trent and Wessex. One specialist said the action was a good indicator that Severn would emerge victorious in the battle for South West.
Turnover at 6 p.m. was 683.7 million shares.
