Dealers shelter ahead of end of first quarter

The FTSE 100 showed no inclination to match an assault on its end-1999 highs yesterday amid signs that business was winding down ahead of the end of the quarter.

Even the announcement that Hyder, the Welsh utility group, had had talks about a possible offer failed to inspire the blue chips; nowadays, Hyder is in the SmallCap index.

After a strong rally in equities in recent weeks, investors have become nervous again about the prospects of higher interest rates in Britain and the US. Last week's British budget showed higher-than-expected public spending while there is still concern that the US Federal Reserve has not done enough to slow the US economy.

Sentiment was not helped yesterday by news that Ms Abby Joseph Cohen, the Goldman Sachs strategist who has been the doyenne of the bull market, was shifting 5 per cent of her model portfolio out of equities and into cash.

At its worst, the FTSE 100 index was 63.5 lower at 6,623.7. But with Wall Street showing only modest losses by the London close, Footsie recovered to end 37.1 down at 6,650.1. Once again, the other indices produced better performances. The FTSE 250 gained 44.3 to 6,646.4 and the SmallCap 7.3 to 3,416.3.

Technology stocks had another good day with Capita, Misys and Baltimore all moving ahead, the latter after announcing a stock split. The FTSE Techmark 100 index gained 40 to 4,763.39.

There was not much economic news yesterday, with no result yet from the Opec meeting on oil production quotas. The next big event will be the European Central Bank meeting on Thursday, although few are expecting a rate rise.

British market strategists at Merrill Lynch, said the bank was still taking a cautious view on the Domestic stock market. In the past few weeks there had been a rally in global bonds with a perception that the global economy was about to slow down but in fact the data has been very strong. The strategists said they suspected that bond prices are overbought at present.

In terms of sector selection, the bank remains against telecoms, media and tech stocks in Britain. While noting a current shortage of such stocks with more buyers than sellers, the bank expects companies will satiate investor demand by issuing more shares.

Volume was just 1.54 billion by the 6 p.m. count. That would have been a decent total 12 months ago but represents a quiet day by the standards of the last six months when turnover of two billion plus has been common.