A deluge of press comment over the weekend suggesting the possibility of a continuation of last week's steep falls in share prices, linked to today's anniversary of the 1987 crash, proved slightly wide of the mark yesterday.
At the end of a tense trading session, the FTSE 100 index settled a net 38.1 lower at 5,869.2, extending the fall over the past five sessions to 365.6, or 5.9 per cent. But the market's junior indices did not mirror the afternoon rally by the FTSE 100, with the 250 index closing a net 73.2 off at 5,517.7. The FTSE SmallCap finished at its lowest of the day, 32.3 off at 2,597.3.
Those fears of a market plunge were stoked by the call by Mr Alan Greenspan, chairman of the US Federal Reserve, for banks to set aside money in case of a setback in overvalued equity markets.
Rises in rates are quietly being factored into the market, with the ECB expected to nudge higher if not this week then on November 4th, along with an expected rise in British rates. The US Federal Reserve is expected to move on November 16th. Turnover in equities confirmed dealers' fears that the prospect of wide swings in markets could deter the big institutions from dealing until calmer markets prevailed.
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