JUST as many old hands had predicted, Mr Alan Greenspan, the chairman of the US Federal Reserve, threw a spanner into the market's works yesterday, warning of emerging inflationary pressures - in the US and triggering a big slide on Wall Street at the start of trading yesterday.
An initial 100 points plus retreat by the Dow Jones Average saw an earlier 10 point rise in the FTSE 100 index wiped out and replaced by a hefty fall the other FTSE indices moved similarly, with initial moves to all time intra day highs by both the FTSE 250 and SmallCap indices sharply reduced.
But with Wall Street clawing back half its earlier slide as London closed, UK stocks ended well above the session's lowest levels.
Footsie finished the day 15.4 off at 4,329.3 while the FTSE 250 slipped 4.2 to 4,660.8. The FTSE SmallCap managed to hold on to a 1.0 gain at an all time closing record of 2,353.3, but was well below the session's best, 2,356.5, recorded just after Wall Street opened.
The FTSE 250 had also recorded a new intra day high during the session, reaching a peak of 4,675.2, also around the time New York started trading.
Mr Greenspan's views on US inflationary prospects took their toll of the Treasury bond market, where the long bond fell around one and a half points before stabilising.
There was no support for UK equities from gilts, which moved sharply lower an sympathy with their US counterparts. Earlier, gilts had dipped a couple of ticks following the outcome of the latest auction, £2.5 billion sterling worth of 8 per cent stock maturing in 2021.
A senior dealer at one big European securities house said London had felt much worse than the 27 point fall it recorded at its lowest level. "I wouldn't be surprised if we had to face a sharp sell off in the next couple of days," he said.
Another leading sales traders said "the US interest rate scenario is the real worry to world markets. If the Fed chooses to nudge US rates higher, Wall Street will be vulnerable and global markets will reflect that vulnerability".
He also pointed out that London had to contend with the Wirral South by election which could unsettle UK stocks.
The US events spoilt what had been another reasonably resilient performance by London stocks.
A long list of corporate results was generally well received, especially figures from Standard Chartered, whose shares were among, Footsie's best performers. Prudential also pleased analysts, reporting a 10 per cent increase in the dividend total.
Commercial Union, along with the rest of the composite insurances, was a disappointment, after confirmation of a rumoured fall in its net asset value.
BP was the best Footsie performer after vague rumblings that a big investment bank was seeking to pre place the Kuwait Investment Office's near 10 per cent stake.
Turnover at 6 p.m. was 852.7 million shares. Customer business on Monday was valued at £2.4 billion.
