A COMBINATION of stocks going ex dividend, the fall in BAT Industries after a US court ruling on tobacco and a weak start on Wall Street combined to send shares in London lower yesterday.
Nevertheless, by the close the FTSE 100 index was still managing to bold above the 3800 level, having dipped to 3792.4 shortly after the start of trading. The leading index finished 7.4 points off at 3803.3, a decent performance considering that stocks going ex dividend knocked off 11 points. The FTSE Mid 250, unburdened by some of the special factors that hit Footsie, managed a 7.4 point rise to 4331.9.
A good set of producer price numbers, which once again showed no immediate inflationary threat, gave a modest lift to sentiment. By mid morning, Footsie was showing a modest 0.3 point gain.
But short sterling futures, the market's vehicle for speculating on interest rate changes, are still indicating that base rates will not fall from their current 5.75 per cent and should rise by March 1997.
Mr Richard Kersley, British equity strategist at Barclays de Zoete Wedd said: "The comments from the Bank of England last week about the risks for inflation may be having some effect. The Chancellor would be hard put to get a rate cut past Eddie George (the Bank governor) on the producer prices alone."
In the afternoon, the British market had to struggle against Wall Street, where the Dow Jones Industrial Average was around 27 points lower by the close of London trading.
The case hit home in the Britain as well, where shares in BAT Industries - whose Brown & Williamson unit was the subject of the court case - were the worst performers in Footsie.
Another piece of news from the US to affect the London market was the decision of Houston Industries to purchase NorAm a US gas company, for $3.8 billion. Houston had long been rumoured as a bidder for one of the remaining independent regional electricity companies and Rec stocks suffered in consequence.
Despite the negative influences, British shares managed to hold on to the gains made in early August, when Footsie rose for seven days in a row. Mr Scott Evans, British equity strategist at UBS, says that "last week, the market was helped by a pretty good set of half year results, some share buy backs and the return of bid speculation. But at its current level, the market is looking very susceptible to any falls on Wall Street".
Once again, Monday proved to be an extremely slow day for trading activity, with just 465.3 million shares traded by the 6 p.m. count, of which 63 per cent was in non Footsie stocks. The value of retail business on Friday was £1.38 billion.
