Market Report - London

What began as a promising week for London's equity market ended in disarray yesterday with stock prices tumbling again and the FTSE 100 finishing below its level at the start of the year.

As if the market did not already have enough on its plate, with optimism over the prospects of a co-ordinated reduction in global interest rates blown apart midweek by Mr Alan Greenspan, chairman of the US Federal Reserve, confidence was dealt yet another blow by Shell.

The oil major's warning on profits and its worst trading conditions in five years, took the market by surprise, sending Shell's stock price down around 9 per cent, before it rallied.

Last week saw FTSE 100 stocks Bass and RMC alert the market about their concerns about current-year profits. Even more of a surprise for European stock markets was the profits warning issued by Alcatel, the French telecoms equipment manufacturer.

The FTSE 100 index settled a further 77.3 lower at 5,055.6, extending the market's slide over the past two sessions to 236.1 or 4.5 per cent. Over the week, the index fell 63.0 or 1.2 per cent.

The market's alarm was not confined to the leaders; the second-line stocks were also heavily sold. The FTSE 250 index slid 40.4 to 4,646.8. And the FTSE SmallCap index did not escape the overall weakness, dropping 11.2 to 2,061.0.

Over the week's first three trading sessions, the FTSE 100 had made rapid progress as dealers anticipated some positive news on interest rates from Mr Greenspan. But the Fed chairman's comments that there was "no endeavour" to co-ordinate a move to cut global rates, produced a sell-off in global stock markets, which engulfed London.

Turnover in equities at 6 p.m. reached 1.15 billion shares, the highest for some months, boosted by the exceptional activity in Shell, which accounted for almost 8 per cent of the market total. Non-Footsie stocks made up 43 per cent.