Downward pressure begins to ease

THE sell off in the British equity market stretched to a sixth consecutive trading session yesterday, but there were signs that much of the recent spate of downside pressure had been absorbed by the market.

The FTSE 100 index closed the session a net 18.1 off at 4,575 8 lifting its decline over the past six trading days to over 200 points, or 4.3 per cent. But it finished well above the session low.

That was 4,547.0, during the late morning, when London was caught in the grip of a fresh burst of nervousness about the possibility of a market hitting Budget on July 2nd, which might well be followed up with another increase in British interest rates.

London's late rally, which dealers said had been encouraged by a pick up in sentiment in the futures market, was all the more impressive in that Wall Street had come in looking weak.

The Dow Jones Industrial Average was down almost 60 points an hour after London closed for the day, although dealers pointed out that Wall Street's retreat was from an all time high, as against London's fall.

The late rally was mostly concentrated in the leaders, with the secondliners finishing only a fraction above the session low, measured by the FTSE 250, while the smaller capitalised stocks were left languishing at the bottom of the day's trading range.

At the finish, the FTSE 250 posted a 30.2 fall at 4,454.8, and the FTSE SmallCap index dropped 14.7 to 2,246.4. The FTSE All Share slipped 10.1 to 2,177.79.

Another reason for the late burst of support across the leader board was a fresh buzz of takeover speculation, which began in the banks and insurance sectors and spilled over into other areas of the market, most notably the defence engineering markets. In the latter, GEC made rapid progress, advancing almost 5 per cent, as hints that long running merger rumours involving the company with British Aerospace may yet prove correct.

NatWest, the centre of intense speculation in recent days, was easily the top performer in the FTSE 100. Weekend press reports pinpointed Barclays Bank as a potential predator and also cited numerous other overseas and domestic banks as possible partners.

Another hint in the market was that Norwich Union might be in the firing line for a potential bidder.

Asked about the likely direction of the market in the short term, the same marketmaker said he felt the market had seen the worst of the sell off.

But the strategists continued: "Given the cash levels of institutions, the expectations of fund managers and the healthy outlook for corporate profits, we do not expect a correction of this magnitude."