The FTSE 100 index suffered its third straight loss in the face of a revival of interest rate fears and another jump in sterling against the euro. In early March, investors took the view that the Bank of England would leave interest rates on hold for several months but since the budget there has been a gradual change of mood.

The FTSE 100 index struggled to make any progress yesterday, with its best showing a meagre 7.2 point gain to 6,657.3. By the close, it had dropped 51.3 to 6,598.8, having been 79.8 lower at worst. The other British benchmarks also lost ground. The FTSE 250 index fell 33.2 to 6,613.2 and the SmallCap 18 to 3,398.0.

The recent rally of the Techmark 100 index also came to an end as the technology stock benchmark slipped 50.57 to 4,712.82. However, it was not one of those trading days where there was a discernible old economy-new economy split. Capita and Misys produced strong performances but Freeserve, Baltimore, Thus and Psion all lost ground.

European and US markets were largely weaker. Although the Dow Jones Industrial Average was around 90 points ahead when London closed, the Nasdaq composite suffered another poor opening after Tuesday's loss.

The economic news was mixed. British exporters will not have been pleased by sterling's rise from 108.5 to 109.5 on a trade-weighted basis, largely due to euro weakness.

OPEC's agreement on oil production, while not unanimous, was enough to send crude prices down by a dollar a barrel. The news was broadly supportive for the market, by reducing inflationary pressures, and did no damage to the share prices of the oil majors yesterday.

But figures published yesterday showed that British mortgage lending was up 8.5 per cent year-on-year, the highest annual growth rate since the early 1990s, and that the seasonally adjusted number of mortgage commitments was at the highest level for three years.

"We have echoes of the late 1980s, with a sharp rise in house prices helping to fuel consumer spending and a downtrend in the savings ratio," said Mr Michael Saunders, UK economist at Salomon Smith Barney.

"The continued strength in personal borrowing, plus the rebound in mortgage commitments, suggest that the outlook for consumer spending (and overall domestic demand) is much more buoyant than the monetary policy committee has expected. Base rates will rise again soon."

Volume was 1.95 billion shares by the 6 p.m. count, with Vodafone again the most active stock.