The "TMTs" - technology, media and telecoms stocks - that were behind the strong showing by London last week brought the FTSE indices back to earth with a bump yesterday.

Those three sectors provided the bulk of the losses in London's benchmark index, the FTSE 100, but there were other concerns affecting the whole of the market.

The FTSE 100 finished a net 101.8, or 1.5 per cent, lower at 6,466.9, but well clear of its worst of the session, when it registered a 188.1 decline at 6,380.6, as the Dow plunged.

The damage wrought in the midcaps was equally severe. The FTSE 250 threatened to drop through the 6,700 level before stabilising and closing a net 110.5, or 1.6 per cent, lower at 6,713.9; its worst of the day was 6,707.6.

The FTSE SmallCap was also under severe pressure, ending 43.5, or 1.2 per cent, off at 3,522.2.

The catalyst for London's steep decline was Wall Street's uninspiring performance on Friday, when the Dow Jones Industrial Average dropped 81 points, closing below 10,000 in the process.

And the Nasdaq dipped off sharply just before the close, finishing only a shade higher, having been up 86 points at its best. Hong Kong and Tokyo both took their cue from the US, ending their trading sessions down 4.1 per cent and 2.8 per cent respectively.

There was renewed and, initially, alarming weakness, too, on Wall Street yesterday, with the Dow and the Nasdaq both falling sharply at the opening. The Dow plummeted almost 200 points and the Nasdaq 209 points, before both staged a determined rally. Not long after London closed, the Dow moved back into positive territory, although the Nasdaq remained under pressure.

Apart from the obvious flurries of profit-taking, dealers in London said the market was now focusing intensely on some critical domestic and overseas economic news due this week.

It is also looking ahead to Tuesday of next week which brings the two main events of the month, namely the budget and the meeting of the US Federal Reserve's open market committee.

There are widespread expectations in global markets that the FOMC will sanction another rise in US rates, in the wake of recent comments by Mr Alan Greenspan, chairman of the Fed, highlighting the rapid expansion in the US economy.

From a sluggish start, turnover in equities built up as the session wore on, eventually reaching 1.89 billion shares by 6 p.m. Drug stocks continued their rehabilitation, while the news that BP Amoco is holding takeover talks with Burmah Castrol prevented an even bigger fall in the 250 index.