London opens on weak note, drifts and quickly falls away

It was an inauspicious start to the week in London's equity market yesterday, with the FTSE 100 once again running away from the 5,200 level. Dealers insisted that the weakness in the market had not been accompanied by any excessive selling pressure, but that it was a combination of bearish factors that built up and drove the market lower. "We had a strong run in the US and here last week the FTSE 100 was up 3.4 per cent and the Dow 3.7 per cent and the feeling is that we'll have to face up to some grim economic news, especially from the US, which could unnerve some people," said one market-maker.

London never looked likely to make progress yesterday, drifting lower at the outset and quickly falling away as the session wore on, especially after Wall Street opened and came under increasingly ferocious downside pressure.

The Dow Jones Industrial Average was down over 170 as London closed, weakened by a sharp sell-off in Boeing in the wake of weekend news that Lockheed Martin had won the contract to manufacture the new US Joint Strike Fighter.

That news provided one of the more comforting stories impacting on the London market, with a number of aerospace/defence stocks, such as RollsRoyce, BAE Systems and Cobham, holding up well in the face of the broad market retreat.

There was also general agreement among traders that the news that Boots' £2.3 billion pension fund had shifted out of equities and into fixed interest stocks over a 15-month period had triggered concerns that other pension funds had also been switching from equities to bonds and that others would follow.

At the finish of the session, the FTSE 100 had relinquished all of last Friday's three-figure gain that followed the better-than- expected rise in third-quarter GDP. The index closed down 102.7, or 2 per cent, at 5,085.9, only a shade above its 5,083.3 session low and its biggest one-day decline since the start of the month. Fair value for the FTSE future is around 20 points over cash.

The Techmark 100 index, hit by a reversal of the recent more bullish performances of IT and computer-related stocks, lost 32.27, or 2.3 per cent, at 1,383.23. Turnover in equities was 1.6 billion shares.