Footsie follows Nasdaq into negative territory

The London Stock Exchange may be planning a merger with its Frankfurt counterpart, but yesterday, as usual, traders looked to Wall Street rather than Europe for direction.

More gloom from across the Atlantic, where the Dow Jones, Nasdaq and Standard & Poor 500 all fell sharply, plus the

ever-present concern about domestic interest rates, prompted a sell-off in London's equity market.

The latest steep declines in US markets came in the form of a profit warning from Novell, the business management software manufacturer and one of the Nasdaq leaders.

On Tuesday, another of the telecoms/high-technology stocks, AT&T, had pulled the rug from under the US markets, issuing a thinly veiled profits warning based on deteriorating long-distance business.

The Novell news put another big dent in Wall Street's confidence, with the Dow promptly diving more than 200 points and the Nasdaq losing another three figures.

London kicked off the session on the back foot and then ran into all sorts of domestic concerns, with the strength of sterling or, as some put it, the weakness of the euro, among the most potent worries.

And the latest Confederation of British Industry survey of distributive trades, showing a rise in high street sales that was below analysts' expectations, did nothing to head off suggestions that the Bank of England's Monetary Policy Committee will nudge up UK rates again at noon today.

The FTSE 100, always under pressure but never in free fall, finished the session down a net 188.6, or 3 per cent, at 6,184.8. That wiped out nearly all the gains achieved during the previous two sessions.

Nasdaq's influence triggered a steep decline in the Techmark 100 index of leading technology stocks, which finished down 118.0, or 3.1 per cent, at 3,707.3.

Although lower on the day, the pressures on the second and third tiers of the stock market were never as severe. The FTSE 250 closed 38.3 off at 6,244.9 and the FTSE SmallCap eased 5.4 to 3,194.1.