`Double witching' fails to cast much of a spell

All those expectations of a hot day in London's equity market, with talk of potentially wild swings in stock prices as "double witching" took place, looked to have been wide of the mark for much of yesterday. Double witching, the dual expiry of the FTSE future and index options, which took place mid-morning yesterday, was something of an anticlimax. It never really looked as if the expiries would cause anything like the volatility some of the more excitable market observers had forecast.

The early afternoon saw the FTSE indices, already lower, slip gently away as the session drew to a close. But the closing auction, which sees all the overhanging bids and offers entered into the trading system for a brief period at 4.30 p.m., brought a tumultuous close to the trading session, as the FTSE 100, already down around 60 points, suddenly plunged to finish the day a net 138.2 off at 6,417.3.

Marketmakers said the late sell-off came in the wake of the overhang of a number of programme trades. And there was a sudden burst of activity, too, in many of the stocks involved in the big changes being made in many of the market's closely watched indices. "It really boiled up late in the day as the re-balancing kicked in," said one marketmaker.

The worries about the impact of the petrol blockade and the high oil price were being played down by dealers yesterday, as was the bullish economic news released during the week. Programme trades, which tended to die off over the holiday period, have made a big impact on London's market in recent weeks. Thursday's massive £600 million-plus buy programme, executed by Dresdner Kleinwort Benson, was among the biggest recent trades.

Those trades executed yesterday, said to have been on behalf of investment funds looking to shift from new to old-economy stocks, did not kick into the market until after the double witching expiries.

The weakness in the FTSE 100 index was never really mirrored by the other FTSE indices, with the exception of the Techmark 100 index, which suffered from the big switching out of new to old-economy stocks.

It suffered too from the marked weakness of Sage Group, the software and computer services company. There have been rumours recently of profit downgrades and yesterday the company's own broker, Deutsche Bank, took the view that other brokers' forecasts were overoptimistic. Sage shares plummeted more than 10 per cent. The Techmark 100 retreated 110.6 to 3,882.77, the lowest point of the day.

The 250 index eased back 9.8 to 6,955.2, having been down to 6,942.9 at worst, while the FTSE SmallCap lost 10.0 to 3,565.6. Over the week the 100 index fell 2.8 per cent, the 250 0.5 per cent, the Techmark 100 3.2 per cent and the SmallCap 1.4 per cent.

Turnover was 1.58 billion shares.