A DAY that promised much delivered little. The stock market showed increasing signs of strain ahead of what could be one of the most critical takeover bids of the decade.
An early attempt by the market to drive the FTSE 100 through its previous all time high quickly foundered, mainly on the gilt market's reluctance to build on recent gains, but also amid continued concerns about the British political scene and worries about the US budget deficit debate.
The FTSE loo finally settled 5.8 to the good at 3,754.2, and was looking increasingly unhappy towards the close of trading. The FTSE Mid 250 index, was never too troubled by the day's events and closed 4.6 firmer at 4,078.2.
There had been an air of optimism in the market early in the session, as dealers noted Wall Street's burst of strength on Friday night. There were also widespread expectations in the weekend press that Granada, the leisure group, would win its bitter battle to win control of the Forte empire.
A Granada victory has been seen by many market observers as paving the way for more contested takeover bids in Britain.
The level of turnover in the equity market was another disappointment. At 6 p.m. turnover was 686.1 million shares, well down on the levels seen during the last few trading session. And over 60 per cent of that figure was transacted in the non FTSE loo stocks.
Market makers were not too unhappy with prospects for the market, insisting that the big institutions had preferred to stand back and wait for the crucial outcome of the Forte/Granada battle before making any big decisions.
The general consensus among traders was that a defeat for Granada would see its stock down 20p and Forte's down 30p. They also said the market would see equities move lower in the short term.
Strategists still see much takeover activity in coming months, which should underpin the equity market. In a market commentary on takeovers, the strategy team at NatWest Securities said bids "will remain a feature of UK corporate life and continue to provide firm support for the market in 1996.
The NatWest team highlighted three reasons why the bid will continue cost cutting strong balance sheets and the belief that Labour will win the next election.
The 60 point surge by the Dow Jones Industrial Average on Friday, which drove that index to within 32 points of its all time high, prompted London's market makers to hoist opening levels and saw the FTSE climb to within 3.5 of its previous record minutes after the opening.
But with gilts, bunds and US treasury bonds failing to make progress, the equity market began to falter. There was no real encouragement from the fourth quarter gross domestic product figure, which came in, as expected, up 0.4 per cent.
Oil shares were among the market's poorest performers, unsettled by worries that a resumption of Iraqi oil sales will damage prices.
