STERLlNG'S continuing strength and Wall Street's surprising late sell-off on Wednesday took the wind out of the London stock market's sails yesterday, despite a fresh blast of bid speculation.
Although economists had expected the Fed not to increase rates, there remained lingering suspicions that Fed chairman Mr Alan Greenspan might have approved a pre-emptive move.
Adding to London's pain was another powerful showing by sterling, as the Bank of England's trade-weighted index moved to its highest level since September 16, 1992, when the pound was forced out of the exchange rate mechanism.
The latest burst of takeover speculation was centred on an already-buoyant telecom's arena, where Vodafone shares suddenly shot up in the wake of rumours that the cellular phones group had received a bid approach. Marketmakers chased the shares higher until a denial of the approach saw the price come off the top.
The big pharmaceutical stocks - classic currency plays - where the most recent bout of bid rumours has died down, suffered again.
Turnover at 6 p.m. was 839.5 million shares. The value of customer business on Wednesday, excluding Crest-executed trades, was £688.7 million.
The developing battle for control of Scottish Amicable, the mutual life group, continued to excite the insurance sector, with dealers taking the view that other bids or mergers in the financial sector were inevitable. Legal & General, the life assurer, and all the composites attracted renewed strong buying interest.