Market Report - London

A strong rally on Wall Street, which regained much of the previous day's setback during European trading hours, helped London's equity market claw its way back from a sharp early sell-off.

But dealers in London, still reeling from the week's declines, which were only partly allayed by the surprise rate cuts in the eurozone countries, remained unconvinced of the ability of global markets to maintain forward momentum.

"There was not any real beef behind market moves today. The US jobs report was seen as helpful, heading off some of the worries about US economic slowdown, and just as you can't ignore a 184-point decline on Wall Street, you can't ignore a threefigure rally," said a senior marketmaker at one European investment bank.

But he emphasised the unease around trading rooms at the problems in Brazil, and the ever-growing list of profit warnings.

At the close, the FTSE 100 was just in positive ground - up 15.8 at 5,581.9, reducing the week's fall to 262.3 or 4.5 per cent.

Earlier the index had swung around sharply, sliding 76.8 during initial exchanges, as the overnight US weakness unnerved the market, before embarking on a gradual recovery that saw the index back into the black as the US non-farm payroll news was released.

The market's mid and smallcaps also rallied from initial weakness, but finished the day in negative territory, with marketmakers taking the view that the flow of bad corporate news will continue and probably speed up in the short to medium term.

The FTSE 250 closed 5.9 off at 4,750.7, leaving the index 175.3 or 3.5 per cent down on the week, while the FTSE SmallCap was 3.0 down at 2,018.4, producing a 52.49 or 2.5 per cent decline over the five-day period.

The market is now setting its sights firmly on next Thursday's meeting of the Bank of England's monetary policy committee, after which the bulls are expecting another reduction in interest rates following the cuts of the past two months.