THE stock market debut of the Halifax building society, newly converted to banking status, over whelmingly dominated the British equity market which lost ground for the fourth consecutive session as the rest of the banking sector came under fire.
Dealers cited a long list of factors behind the slide, including the forthcoming budget, scheduled for July 2nd, initial unease in European markets following the victory by the Socialists in the French election and the possibility of a rise in British interest rates.
London's poor performance came as no real surprise to many observers. "As soon as the Halifax share price came off the boil the market dropped like a stone it was just the excuse the marketmakers were looking for," said the head of sales trading at one big European securities house.
The FTSE 100 index finished 58.5 lower at 4562.8, a four day decline of 118.8 or 2.5 per cent, and the first time it has been below 4600 since May 8th.
The FTSE Mid 250 and the SmallCap, were less affected. The former closed 13.9 off at 4481.9 and the latter 2.8 easier at 2291.4. The FTSE All Share index dipped 8.39 to 2,192.52.
"The market was overbought. The sector was overbought. It was ripe for a two day correction,"
said Mr John Shelley, director of UK market leaders at Abtrust fund managers. However, he thought the sell off would be short and that the bank stocks and market would rebound.
Earlier, London had kicked off the day in prime form, driven sharply higher by the opening performance by Halifax shares, which began trading at 774 1/2p and nudged up to 776p, before being hit by profit taking. British stocks were also helped by Wall Street's rally on Friday, which helped the Dow Jones Industrial Average recover from being down 80 points to close marginally higher on the day.
The first signs of selling in Halifax were seen as the trigger for a bout of wholesale profit taking in the financial sector, especially the banks, which featured prominently among Footsie's worst performers. The banks have been described as ripe for a setback, notably by Goldman Sachs at the end of last week.
Turnover in Halifax shares accounted for over half the market total, which reached 1.283 billion shares at 6 p.m.
Already pressured by the increasing nervousness in the banks, London was additionally unsettled by the poor opening on Wall Street yesterday. The Dow fell about 20 points shortly after the market opened in the wake of a stronger than expected purchasing managers report for May, which was interpreted as increasing the chances of a rise in US interest rates.
