Uncertainty causes Footsie to slide

An element of uncertainty crept into London's stock market yesterday, bringing an end to two straight winning sessions, as the big institutions held back from the market ahead of the crucial decision by the US Federal Reserve's open market committee on interest rates.

Dealers said the London market had been driven higher for much of the session by rate hopes but that the market had lost its nerve just before the close of business.

The late sell-off of the market's front-line stocks saw the FTSE 100 index finish a day of erratic movements with a modest 7.8 decline at 5,502.7.

Footsie had drifted easier at the opening, only to rally strongly mid-morning after some encouraging domestic economic news.

But there was never any real enthusiasm to chase the equity market, market-makers said.

The second and third-line stocks were always under selling pressure, with the FTSE 250 and SmallCap indices never recovering from an early fall.

The FTSE 250 index finished 26.5 lower at 4,809.1, having bottomed at 4,806.5. The FTSE SmallCap closed at 2,060.9, down 6.3.

Noting the day's performance, a senior dealer at one leading European stockbrokers said he felt global markets had run ahead "too far, too fast" and that the odds, at best, now favoured a period of consolidation, if not a correction.

"We've heard the stories about the build-up of cash and the talk about the imminent take-over bids. But these are not new stories - they have been around for months, if not years," said one of the front-line market-makers.

"I wouldn't want to chase the market from here," he warned.

At the 6 p.m. cut-off point turnover had reached 750.3 million shares.