LONDON equities failed to respond to some surprisingly positive economic data and concentrated instead on the prospects for Wall Street. Consequently, muted profit-taking remained the theme of the day and the FTSE 100 index closed 5.5 lower at 4,332.3.
On the other hand, the FTSE Mid-259, which is less exposed to international pressures, rose 6.2 to 4,612.7 and the SmallCap improved 2.4 to 2,343.4.
There was no lead from Wall Street, because US dealers were celebrating President's Day holiday on Monday. But an early mark-down was reversed as the Footsie futures led the index higher.
At its best, shortly after the start of trading, the blue chip index was 13.1 points up and only 2.5 points below its record high achieved last Friday. From then on, it wrestled with contrasting pieces of news.
On the broader economic front the latest public sector borrowing figure showed a repayment of £5.8 billion against economists' forecasts that were some £2 billion lower. The removal of pressure on government bond issuance sent gilt prices up by some 10 ticks at the 10-year maturity.
Also, sterling softened against both the US dollar and the deutschmark, easing some of the pressure on British exporters.
These encouraging domestic economic nuggets were offset by a sharp reversal of fortune in Bnrclays shares after the high street bank disappointed the market with its figures and the fact that its share buy-back would not occur immediately.
Banks are the largest component of the market, representing 12.6 per cent of the FTSE All-Share index. Over the past year they have been one of the strongest performing sectors in the market. As such, the stark performance of Barclays spilled over to sector rivals and sent some nervous signals through the market.
However, several traders and strategists have pointed to the underlying strength of the banks' earnings and the huge influx of capital which is expected after the flotation of the big building societies.
"It is an area which has got a lot further to go. They will benefit increasingly from the `flight to quality' argument," said Mr Corey Miller, equity strategist at Credit Lyonnais Laing.
