A day of erratic movements in London heavyweights ended with the FTSE-100 index clinging to a narrow gain.
Without the burden of a startling collapse in the share price of BT, the UK's telecoms champion, the Footsie would have posted a near three-figure rise, dealers said.
In the event, news that BT had brought forward its third-quarter results, which included a much worse-than-expected decline in pre-tax profits, plus details of increased competition in its main businesses, demolished the BT stock price and dented overall market sentiment.
"The company has done itself no favours at all by today's events. This came out of the blue and will not be forgotten for a long time. There is a lot of pain in the market because of this," said a telecoms specialist.
The BT stock price collapse eroded confidence throughout the market but it was the performance of another telecoms giant, Vodafone AirTouch, and an early upsurge in BP Amoco, that provided a much-needed cushion.
At the end of a long day, where the anxiety level was taken up another notch by speculation about a shift in US interest rates after the close, the FTSE-100 index closed 11.9 up at 6,302.8. BT's slide, almost 18 per cent, was worth around 68 FTSE-100 points. It was very different at the outset of the trading session. The 100 index kicked off under heavy downside pressure because of the BT news. Traders ignored the strong finish to Wall Street on Tuesday, where the Dow Jones Industrial Average posted a three-figure gain.
At its worst the 100 index was down 49.3. At its best, when BP Amoco and Vodafone AirTouch were rampant, the index hit a session high of 6,345.2, up 54.3.
Sentiment across the rest of the market remained extremely fragile, however, with the market unsettled by the prospect of another rise in UK interest rates after the next meeting of the Bank of England's monetary policy committee, scheduled for Wednesday and Thursday, and sterling's recent strength. The FTSE 250 closed 43.5 lower at 6,120.5, with many of the consumer areas of the market under sustained pressure. The SmallCap was also pressured, slipping 11.4 to 3,156.3.
Some market observers remain bullish of the long term prospects for the FTSE 100. Michael Hughes, director of the UK investment management team at Baring Asset Management, said the index would "rise to 10,000 within five years. We are witnessing the fourth and final stage of the longest bull market this century".
He cited three factors behind the forecast: the low cost of capital; the UK government's adoption of an inflation rather than money supply target; and new business opportunities stimulated by internet usage 80 per cent of UK personal income will be generated by households who have access to the Internet.
