AN increasingly volatile Wall Street, plus some disturbing UK economic data, brought the London market's upward march to an abrupt halt yesterday.
The FT-SE 100 index, which hit record intraday and closing highs in the previous two trading sessions, failed to make any headway after opening under pressure. It closed a net 26.4 off at 4,024.4, only a couple of points off the day's low, although it never really looked like falling below the 4,000 level.
The lacklustre sentiment in the leaders filtered through to the second rank stocks, where the FT-SE 250 slipped 10.7 to 4,438.2, but there was little or no sizeable selling of the small caps. On the contrary, the SmallCap index managed a minor improvement, finishing 0.5 ahead at 2,188.9.
Wall Street's decline on Tuesday the Dow Jones Industrial Average finished five points down and only just above 6,000 - unnerved British dealers who nudged shares lower at the start.
But the real punishment for London came with news of a much sharper than expected fall in unemployment during September, higher than forecast average earnings in the year to end August and a higher than expected public sector borrowing requirement for September.
Mr Richard Jeffrey, group economist at Charterhouse Ban, said: "The economic situation in the UK is looking increasingly worrying. A tightening of monetary policy might be a good thing." The economic data were interpreted by dealers as signs of increasing inflationary pressures, and saw gilts move decisively lower, with the 20 year gilt almost 1 1/2 points down at the close, prompting a progressive slide in share prices.
And with the Dow on the retreat at the outset of trading in New York, down over 30 points and well below 6,000, London gave further ground. Wall Street appeared to be damaged by a sell off in the high tech stocks. The day's US economic news, inflation figures for September, came in broadly as expected.
City dealers were ruffled, but by no means disheartened, by the day's events. One head trader said he viewed the setback in share prices as "an orderly pause in proceedings, not a retreat. The bulls have pulled in their horns for the time being. They prefer to wait until we get the weekend out of the way," a reference to Saturday's ninth anniversary of the great crash of October 1987.
He also said that the market had Cup at St Andrews, this week he got used to taking 30 point drops in its stride and it now had to get used to 60 point moves.
Turnover levels were not exceptional, despite the sizeable fall in share prices. At the 6 p.m. count, turnover was 684.5 million shares, with FT-SE 100 stocks accounting for well over half. Customer business on Tuesday was valued at £1.59 billion.
The expiry of equity options caused some distortions, notably in Allied Domecq, where the shares were the best Footsie performer. The recurring takeover talk surrounding Zeneca increased late in the session, projecting the stock higher.
