Greenspan's words fail to soothe Footsie

When they go up, it goes down and when they go down it goes down too.

The Footsie had been alone in failing to benefit from the soothing words from the chairman of the US Federal Reserve earlier in the week.

As the Dow Jones Industrial Average, Nasdaq and French and German markets all took off on Thursday, the UK's blue-chip index barely registered.

Yesterday, the world caught a cold and Footsie sneezed along with everyone else.

"It is interesting that we did not react to the Greenspan testimony," said David McBain of Deutsche Bank.

"Perhaps it is a reflection of the fragile state of confidence and the underlying wariness of investors in the UK market."

Strategists attributed the start of the global weakness to a profits warning from Ericsson, one of the world's biggest telecom equipment makers.

The Ericsson saga developed further in the UK after TeleWest Communications confirmed it was unable to meet demand for digital set-top boxes.

Both pieces of news damped hopes of a recovery in the hard-pressed telecoms and technology stocks. The telecoms sector, which represents a fifth of the whole Footsie, was off more than 2 per cent yesterday but other heavyweight areas followed suit.

Pharmaceuticals, which represent more than 12 per cent of the Footsie, fell 2 per cent on concerns about US pricing and oil majors were down sharply.

The net effect on the Footsie was a fall of 90.6 to 6,378.4 with more than half of that accounted for by the slides in Vodafone AirTouch and BP Amoco, the market's two biggest stocks.

The decline came despite GDP data comfortably in line with forecasts. The figure for the second quarter was up 0.9 per cent against a consensus forecast rise of 0.8 per cent.

Some strategists said a surge in service sector output added to worries that interest rates might not have peaked but that was countered by a contraction in industrial production.

The weakness in Footsie was a disappointment to equity bulls who have been looking for a chart break-out after an 18-month flat period.

However, chart-based analysts said it was consistent with a trend that has seen the market range narrowing steadily.