London, along with most other European markets, suffered from another bout of interest rate jitters yesterday, falling sharply ahead of today's meeting in Washington of the US Federal Reserve's Open Market Committee (FOMC).
Adding to the market's worries was another twitchy session in Asia, where the continuing problems in Jakarta, riven by riots in recent days, drove Indonesia's market down more than 4 per cent and affected Hong Kong, which slipped more than 1 per cent. On the positive side, Tokyo managed a minor improvement.
And Wall Street failed to come to the London market's rescue, with the Dow Jones Industrial Average slipping back again. Some market observers think it likely to fall below the 9,000 mark ahead of the FOMC meeting.
The FTSE 100 lost the 5,900 mark early on and, more worryingly, fell back through the 5,800 level in mid-afternoon when Wall Street was looking increasingly vulnerable.
But evidence of cheap buying interest from some of the big institutions enabled the FTSE 100 to scramble back above 5,800 to finish a difficult session 91.6 off at 5,826.2. At its worst, Footsie posted a 123.3 decline at 5,794.5.
Although uneasy about developments overseas, dealers insisted the London market's undertone remained reasonably sound, pointing to the resilient performance of the FTSE 250 and the latest good showing by the FTSE SmallCap index.
The latter shrugged aside the pessimistic stories encompassing the leaders and edged higher to new intra-day and closing records.
"You only have to look at the low turnover in the market today to see that it was more of a markdown than a sell-off. It is a classic mark-down in front of an important economic event. I wouldn't be surprised to see us get back all and more of today's fall if the Fed leaves rates on hold," said one marketmaker.
He also pointed to the continuing spate of takeover news, some bullish, some bearish, right across the stock market.
Most areas of the market were enlivened by takeover developments. The front-line stocks included numerous takeover stories, including the revelation that Asda, the supermarkets group, had held collaboration discussions with Kingfisher. Asda shares fell back, with specialists increasingly of the view that the group is on the acquisition trail, while Kingfisher made progress.
Other bid talk included Halifax and Royal Bank of Scotland, whose shares were among the best performers in the FTSE 100 after weekend reports that the two banks had held preliminary talks, although both shot down merger reports.
The FTSE 250 finished the day 5.3 easier at 5,792.5, having been down 10.8 at its worst not long into the morning session.
But there was no stopping the FTSE SmallCap which settled 2.3 higher at a record closing level of 2,751.5, after an intra-day peak of 2,752.3.
