The buying frenzy that drove up the London equity market's benchmark FTSE 100 a record 205.3 points on Tuesday looked set to continue in early trading yesterday, only to peter out.

Profit-takers moved in and a gain of nearly three figures in the index was quickly wiped out, eventually being replaced with a hefty net loss.

After a session of big swings in sentiment, the FTSE 100 was left with a 25.1 decline at 4,828.9.

At its best, the index touched 4,949.5, up 95.5. The downswing extended to 172.4 points, with the index sliding to 4,777.1.

It then embarked on a decent rally, prompted by Wall Street's three-figure jump shortly after US trading started yesterday.

Mr Alan Greenspan, chairman of the US Federal Reserve, hinted that interest rates might be cut further.

The FTSE 250 index closed 17.2 off at 4,360.2 while the FTSE SmallCap, responding to news that the small companies sector now offers a higher return than gilts, staged an unconvincing but nevertheless welcome rally after a sequence of eight straight losing sessions. It closed up 2.1 at 1,866.0.

Market-makers, many of whom had indicated their distrust of the market's ability to extend Tuesday's gains, said sentiment had quickly deteriorated with the realisation that the hoped-for cut in British interest rates had already been factored into the market.

They also feared there was a risk that the Bank of England's monetary policy committee might not cut after all. The committee's decision will be announced at noon today.

Turnover in equities was a healthy 1.13 billion shares by the 6 p.m. count, of which 55 per cent was in non-Footsie stocks.

Five blue-chip stocks traded more than 20 million shares apiece.