An element of calm returned to world stock markets yesterday, but it was not enough to allow the FTSE 100 index to recover from Wednesday's losses.
After London closed on Wednesday, the Dow Jones Industrial Average turned a 100-point plus deficit into a 27-point loss. Wall Street was stable again yesterday, recovering from an early loss to be 10-20 points up as UK trading finished.
But while Footsie started the day solidly enough, regaining the 5,900 level in the first half hour, the market lost its impetus in late morning. By mid-afternoon, the blue chip index had retreated 53.7 to 5,816.5. At the close, it was 7.9 points down at 5,862.3.
Philip Isherwood, UK strategist at Dresdner Kleinwort Benson, said the market was involved in a sideways churn. "There's a bit of confusion on the domestic side about interest rates and also concern about events in Asia and Federal Reserve policy in the US."
The latest domestic economic evidence came in the form of the industrial trends survey from the Confederation of British Industry. It showed that export orders were at their lowest level since January 1983, in spite of the recent fall in the pound. Total order books also fell.
But the CBI had some better news on inflation, with the survey reading on price expectations reaching the lowest level yet recorded.
Adam Cole, UK economist at HSBC Securities, said the survey was "even gloomier than might have been expected. Output expectations point to on-going recession in manufacturing, while the price expectations series suggests out-and-out deflation in the sector is just around the corner."
The survey seemed to have helped remove a little of the upward pressure on sterling which fell 1 pfg against the D-Mark to DM2.8956. Gilts were flat.
Meanwhile, the London Stock Exchange revealed plans to delay market opening time to 9 a.m. to tackle the lack of liquidity, to reduce the pre-market trading period to 10 minutes and, as of December, to introduce a volume-weighted average closing price to eliminate erratic prices at the end of the day.
The proposals are designed to tackle liquidity problems with the order-driven trading system introduced last year.
Activity was fairly robust yesterday. Volume was 992.7 million shares by the 6 p.m. count, of which 60 per cent was in non-Footsie stocks. Of the latter, 91 million shares were traded in the penny stock Tamaris. The FTSE 250 index extended its "lead" over Footsie, rising 17.7 to 5,898.5 while the SmallCap dropped 3.6 to 2,769.6.
Technical analyst Brian Marber says that the last 7 3/4 years in the UK stock market look remarkably like the 73/4 years that led up to August 1987. At that point, the stock market suffered a 9 per cent reaction before its big fall in October.
Mr Marber says that the charts could point to a 9 per cent reaction this time. The market is in a triangle pattern; if it breaks out on the downside, by closing below 5,826, it should fall 9 per cent from the 6,105 high.
Key financial stocks, which took the brunt of the recent spate of selling, reversed some of their recent bad run but remained largely mixed.
HSBC gained 12p to £15.43, Barclays slimmed 6p to £16.44, Royal Bank of Scotland eased 2p to £10.23 and Lloyds TSB cooled 7 1/2p to 870p.
Standard Chartered lost 23p to 749p, NatWest gained 4p to £11.07.
Halifax, which defied gravity yesterday and made gains as expectations grew that it would bid for the Royal Bank of Scotland, finally fell foul of a round of selling and was down 27p to 896p.
Pharmaceuticals initially made some headway only to fall back with Zeneca down 24p at £24.55, Glaxo Wellcome 11p weaker at £16.71, while SmithKline Beecham managed to head 3p north to 675p.
