London stocks yesterday gave back some of the recent gains that have been prompted by hopes of further cuts in British interest rates.
The weakness had nothing to do with changed perceptions about the potential for rate cuts after the next meeting of the Bank of England's monetary policy committee (MPC), scheduled for Wednesday and Thursday of next week.
If anything, dealers said, the market was increasingly of the view that perhaps 50 basis points, rather than the previously expected 25, would come off rates at midday on Thursday.
The weakness had domestic and international components. Wall Street had given a disappointing performance on Tuesday, with an early 100-point rise on the Dow Jones Industrial Average transformed into a 66-point closing fall. Then Tokyo continued the downbeat trend, dipping more than 2 per cent.
There was also some early unease about Brazil's economic problems and the austerity package announced yesterday afternoon.
The domestic problems for London came in the form of some disappointing news from the consumer sectors, notably from J. Sainsbury, Britain's second-biggest food retailer and Whitbread, the leisure group.
The FTSE 100 finished the day 37.3 off at 5,293.9, but was well clear of its session-low, reached in the early afternoon when the index hit 5,238.7, down 92.5.
The market received a late lift from Wall Street where, shortly after the opening bell, the Dow Jones Industrial Average moved back through the 8,400 level.
In stark contrast to the difficult trading session for the leaders, the FTSE SmallCap posted its 12th consecutive gain as it settled 0.4 firmer at 1,970.4.
