A SPLENDID stock market debut for the newly demutualised Norwich Union coincided with a decidedly unhappy day for the rest of the British equity market.
Instead of basking in the reflected glory of Norwich Union, the market had to come to terms with a report that said the central planks of the July 2nd budget would be the abolition of the 20 per cent tax credit on dividends and imposition of the windfall profits tax.
The tax credit abolition, in particular, was viewed with dismay by dealers who said such a move could trigger a market decline of up to 9 per cent if the market responded similarly to the 5 percentage points reduction in the credit made by Mr Norman Lamont in his 1993 budget. That was followed by a 2.8 per cent fall in the FTSE 100 index in the succeeding month.
After a steady opening, helped by the initial burst of enthusiasm surrounding Norwich Union, Footsie gradually gave way, with sentiment eroded by the tax credit story.
There were fears too that the euphoria created by the Alliance & Leicester, Halifax and Norwich flotations might have marked the top of the current rally.
As soon as the Norwich flotation got underway, City Index, the spread betting bookmaker, began grey market trading in Woolwich Building Society shares, scheduled to float on July 7th. City Index's first price on Woolwich was 327p-337p.
There was very little help for London from Wall Street where the Dow Jones Industrial Average, after hitting six straight closing records, slid almost 30 points in quick time. The US market soon picked up, however, posting a minor gain an hour after London closed.
Footsie managed to claw its way off the day's low of 4,735.5, down 47.6, reached just before US markets opened, but still closed 38.0 lower at 4,745.1.
Other FTSE indices were similarly affected by the tax story. The FTSE 250 finished 29.0 lower at 4,557.1, only marginally above the day's low, while the FTSE SmallCap dipped 4.7 to 2,283.8, after surprising with a minor gain at the start of trading.
Concerns about the July 2nd budget are not the only hurdle the London market has to contend with in the short term. Wednesday brings the expiry of equity stock options, and Friday sees a series of expiries, the socalled triple witching, comprising the simultaneous expiry of the FTSE 100 and 250 futures plus FTSE 100 index options.
The banks provided one of the day's biggest movers in National Westminster, where the profits warning and news of the resignation of Mr Martin Owen, NatWest Markets' chief, caused ripples of unease. Some dealers said they expected National Westminster to move quickly to repair the damage to its image, possibly by a strike at a building society or life assurer.
