Wall Street's big losses overnight and another dose of Asian "contagion" left London's stock market looking increasingly ragged yesterday.
The Asian region's financial and economic problems have prompted widespread profits downgrades and warnings from leading international companies.
The latest warning came from Microsoft, the US computer software group, following similar comments from IBM earlier in the week.
More worrying for London, dealers claimed, was the way the stock market slipped back despite continuing takeover speculation, this time focused on the telecoms arena.
The telecoms sector provided the second, third, fifth and eleventh best performers in the FTSE 100 index. Turnover in the sector also caught the eye, with BT accounting for more than 3 per cent of the market total.
Market talk initially focused on the possibility of a double bid by AT&T of the US for Energis and Vodafone, a story which saw both shares move sharply higher. But the weight of money quickly shifted to BT where the market was alive with rumours that Microsoft was about to launch a bid for the telecoms giant.
Dealers, shocked by the surge of buying of BT, said an interactive joint venture with Microsoft was much more likely than a straight takeover and also noted strong rumours that a global joint venture with Bell Atlantic was seen as feasible.
After a difficult trading session, the FTSE 100 had dropped 19.2 to 5,253.1, well above the session low of 5,215.9, recorded shortly after the opening of trading.
The FTSE Mid-250 index, meanwhile, settled 12.5 down at 4,813.3, only a shade above the day's lowest level, 4,811.4, reached just before Wall Street opened. The FTSE SmallCap index also lacked support throughout the day, closing 5.6 off at 2,358.6.
London was on the back foot from the start, with sentiment unsettled by events overseas.
The Dow Jones Industrial Average closed well off its worst level, but nevertheless was still down 78 points at Wednesday's close, while the Asian markets sustained more big falls, with Hong Kong down almost 4 per cent, Tokyo 1.6 per cent lower, Seoul 4.5 per cent weaker and Jakarta, hit by another frightening slide in the currency, down 4.8 per cent.
Various attempts at rallies in London generally ran out of steam quickly and were hindered during the afternoon by another disturbing performance by Wall Street, where the Dow dropped more than 80 points, before stabilising.
Noting the latest worrying developments in Asia, a senior institutional salesman at a leading British broking house warned that the fallout from the Asian turmoil would cause further problems for many of the leading European and US companies.
Turnover in equities, lacking the corporate-driven business of recent sessions, was a disappointing 850 million shares by the 6 p.m. count.
The retail sector witnessed a historic shake-up after John Menzies announced it was selling off its high-street bookshops.
The company said talks were at an advanced stage on a bid for the 232 shops and bookstalls. A further move will see the demerger of its 220 Early Learning Centre children's stores.
John Menzies, down 12 1/2p to 351 1/2p, said it would concentrate on distribution and air cargo handling.
There was gloom for Oasis stores after it said same-store sales had slipped 6 per cent in the 25 weeks to January 17th, but the womenswear and accessories group said profits for the 53 weeks to the end of January would be in line with market expectations. Oasis weakened 10 1/2p to 124 1/2p.
Other retailers were feeling the crunch of yesterday's figures confirming that spending during Christmas was down with outdoor sportswear Blacks Leisure down 1 1/2p to 459 1/2p and Body Shop 3p weaker at 122p.
