The British market's extended run in the sun came to an end yesterday on a day when interest rates fell to their lowest level for 22 years. Having risen in a straight line since May 28th because of a benign domestic outlook, the FTSE 100 buckled under global pressure to close 49.6 off at 6,403.4.
Old hands were left mistily reminiscing at the last time British base rates reached 5 per cent - when Queen Elizabeth was celebrating her Silver Jubilee and Virginia Wade won the Wimbledon women's singles.
Market-makers were surprised equities reacted so cautiously, particularly as the rate cut - the seventh since last October - had been far from discounted. They were even more shocked that government bonds should fall more than a point on the day.
But there was a bigger worry drifting over from Japan. Economists had expected first-quarter gross domestic product to come in at 0.2 per cent and were stunned to see the decimal point move one place to the right when the figure came out at 1.9 per cent or 7.9 per cent annualised.
Nevertheless, it was not all bad news. A dose of inflation would help some of the stocks geared towards cyclical recovery, particularly commodity-related companies. BP, Shell Transport and Rio Tinto, the mining group, were all up. Turnover by 6 p.m. had reached 1.1 billion shares, with the bias in favour of non-Footsie shares.
