SOME worrying news on the domestic economy, which ditched the gilts market, plus a poor opening performance by Wall Street took the wind out of the sails of British equities yesterday.
Previously the FTSE 100 had basked in the glow of a scintillating performance by National Power and its fellow generator PowerGen, reaching an all time intra day high of 34,837.5.
News that the Chancellor of the Exchequer and the governor of the Bank of England had both indicated the possibility of a rise in interest rates later in the year, in the event of any threatened expansion in money supply, was another dampener on the market.
Dealers insisted, however, that the latest news on the economy, which showed a much higher than expected fall in unemployment last month and a disturbing increase in average earnings, would prove only a temporary brake on the market's recent strong upside performance. There was also renewed talk that a bid for Ladbroke, the hotels and gaming group, was being prepared.
The market's poor showing confounded some of the optimists, however, who had expected a surge of fresh buying after confirmation of Tuesday's intense speculation that a bid move against National Power was imminent.
The FTSE 100 index, which cruised through the 3,800 level on Tuesday, ended a difficult day a net 19.7 lower at 3,805.6.
There was a much better feeling around the market's second line stocks, however, which saw the FTSE Mid-250 index ignore the problems of the leaders and move up 5.6 to a record 4,464.1, its fifth consecutive peak.
Senior dealers were by no means disheartened by the market's slide yesterday. "More bids in the utilities mean more cash coming into the market; and you have to remember that the market is due some profit taking after its recent good run," said one senior market maker.
It was said that, at 3,800 on the FTSE 100, the market has started to run out of steam in the short term. Turnover at 6 p.m. was a good 927.3 million shares, with non Footsie 100 stocks again accounting for over 60 per cent of the total.
