The story of the London stock market yesterday was largely a paragraph from the latest Asian saga. Weakness in the Japanese yen against the dollar tipped over into heavy selling of the Hang Seng as investors worried about Hong Kong's peg against the US dollar.
And the latest attack on the Hong Kong market sent it to a three-year low with a 5 per cent loss.
That pushed London's Hong Kong-related stocks down sharply and set the trend for the day. The two big Hong Kong plays - HSBC and Standard Chartered - make up a quarter of the banking sector, which in turn represents almost 20 per cent of the overall market.
With the market receiving no lead from the release first thing of the minutes from the Bank of England's monetary policy committee, that level of pressure was bound to predominate.
The FTSE 100 index was off more than 50 points within half an hour of the start of trading and subsequently stayed within a tight range for most of the day.
Any feedback from Mr Alan Greenspan's speech to the US Congress on the economy was not expected to surface before the market closed and, by that time, the World Cup had kicked off with the Scotland-Brazil match.
Consequently, Footsie remained focused on the Asian reaction and ended the day 32.4 lower at 5,987.4. The FTSE 250 closed 29.7 lower at 5,936.9 and the SmallCap 5.7 off at 2,781.4.
Nevertheless, dealers were not significantly discouraged by the day's performance. They said the falls coincided with turnover that was low at first sight and even lower in cash terms. That suggested there was little genuine selling. Volume of 840 million shares by the official cut-off point was below Monday's level and flattered by turnover of almost 100 million shares in two small stocks - Signet and Tamaris.
One senior sales trader commented: "Once you discount the low volume, we have seen some reasonable two-way institutional business. We were always going to open lower because of Asia and so was Wall Street. But the Dow looks resilient and I think the recovery has started."
The Dow Jones Industrial Average started about 40 points lower and slowly clawed its way back during the last two hours of London trading.
As for the Bank of England minutes, they appeared to generate apathy and confusion. The minutes showed the policy committee had voted seven-to-one against raising rates at its previous meeting on May 6th-7th. That meant that several members had changed their minds between then and last week's rate rise.
Mr Richard Crehan of Morgan Stanley Dean Witter said: "I think the minutes are being regarded as very backward-looking."
