Brief rise cannot halt FTSE's downward trend

A change in month did not bring a change in fortune for the UK equity market, which continued its downward trend.

After a brief upward move at the start of trading, the FTSE 100 index spent the rest of the day in negative territory. At its worst, during lunchtime, the index was down 74.9 at 5,558.8. But a strong start on Wall Street, and a 25-point gain in the closing auction, helped the index cut its losses to 15.2, for a closing level of 5,618.5. That left the index 9.7 per cent down on the year.

The other indices were mixed. The FTSE 250 and SmallCap made small gains, the former edging up 4.9 to 6,099.2 and the latter 1.8 to 2,884.8. But the Techmark 100 lost ground again, falling 19.8 to 1,907.78, less than a third of its peak level.

On the economic front, the UK purchasing managers' index for March fell below 50, indicating that activity in the manufacturing sector is now in decline. The survey also showed that output prices fell during the month.

In the corporate sector, the highlight was Railtrack, which fell 17 per cent after accepting tough regulatory restrictions in return for a £1.5 billion sterling advance from the UK government. The latest domestic profits warning came from MMT Computing, a software group.

Turnover was a modest 1.71 billion shares by 6 p.m., with Vodafone making up about 15 per cent of the total.

The start of a new quarter brings a chance for institutions to refresh their portfolios and for strategists to update their recommendations. "We think UK equities are very attractively valued at these levels," said Ian Scott of Lehman Brothers. "We think that the market will stage a rally over the balance of the year; we are sticking with our FTSE 100 year-end target of 6,800." However, Steve Russell of HSBC said: "We have moved underweight UK equities in our global and pan-European portfolios. Although we expect a strong recovery in equities in the second half of 2001, the UK may lag behind the rest of Europe and the US in the scale of its recovery. UK valuations are still cheap, but falls in the US and European ex-UK markets have left them on similar, or lower, ratings."