THE FT-SE 100 Index came back to within 7.2 points of the 4,000 level yesterday, as British shares retreated in the face of a poor performance by Wall Street overnight and at the start of trading yesterday.

Adding to the market discomfort late yesterday were rumours, subsequently denied, that Mr Boris Yeltsin, the Russian President, had died. Notwithstanding the denials, the FT SE 100 index ended the session a net 26.3 lower at 4,009.3, only two points above the day's lowest point.

The selling pressure tended to be confined to the leading stocks however, with the second liners and small cap stocks little changed at the end of the day.

The FT-SE Mid-250 ended a mere 4.0 off at 4,431.3, while the Small Cap index managed the smallest of gains, closing 0.1 up at 2,177.3.

"The Yeltsin rumours caused a mini markdown, but there was no real evidence of any large scale selling," noted one dealer. He said the big institutions were holding off, concerned that Wall Street might tumble further.

But he insisted that they would move in to pick up cheap stock as soon as the market started to turn.

Domestic political worries were also said to have played a part in the decline, with vague talk of a snap general election, although this was disregarded by strategists.

Dealers pointed to the performance of gilts - where the 10 year gilt finished around eight ticks better and the 20 year gilt three eighths higher - as an indicator of the likelihood of a surprise election - "no chance", as one put it. This morning brings official inflation figures for September, forecast to come in up 0.5 per cent on the month and 2.1 per cent over the year.

There was widespread concern at the latest sell off on Wall Street, where the Dow Jones Industrial Average followed Tuesday evening's 13 point fall with a near 50 point decline not long after opening. The US Treasury market's resilience helped to calm rather frayed nerves on both sides of the Atlantic.

Relatively poor turnover across British equities lent credence to dealers' claims that there had been no real downside pressure on British stocks. Turnover at 6 p.m. came out at a relatively light 645.7 million shares. Customer business on Tuesday was £1.75 billion sterling.

The worst affected areas of the market were oils and pharmaceuticals, traditionally big favourites with US investors. One trader said Tuesday evening was the first time for many weeks that US investors had been net sellers of British stocks.

The effect on those sectors was evident from the outset in London with one of the big US brokers, Lehman Brothers, playing a big part in hitting Glaxo shares.

Mr David Schwartz, stock market historian and author of the Stock Market Handbook, pointed out that yesterday was the seventh most likely day of the year to witness a sharp reversal in share prices and today the tenth most likely.