Economic data fail to lessen gloom

THERE was little respite for London's equity market yesterday, with share prices retreating across a broad front in the wake of the latest setback on Wall Street.

Not even much weaker than expected economic data, interpreted as lessening the chances of a British interest rate rise, could prevent the latest slide in London stocks.

The market's weakness stemmed mainly from last Friday evening's 148 point fall in the Dow Jones Industrial Average after strong economic data. That news intensified fears that US interest rates might be increased at the next relevant meeting of the Federal Reserve.

And Wall Street's early retreat yesterday, when it fell over 20 points on the Dow Jones Industrial Average, did little to reassure, dealers fretting about an overheating US economy.

The yield on the US long bond ticked up again early yesterday, reaching its highest level since the first half of 1995. According to strategists, it holds the potential to cause substantial upsets across global markets if the US inflation report, due later today, disappoints.

Adding to London's discomfort was a niggling worry that Labour's lead over the Conservatives in the run up to the May general election was being gradually eroded - a hung Parliament, which looks more and more possible, being the worst outcome of the election as far as the stockmarket is concerned.

The FTSE 100 index, reflecting domestic and US concerns, closed another 19.0 lower at 4251.7 - a two day decline of 61.5, although it was well above the day's worst level of 4239.9, seen at the opening.

Second line and smaller stocks, which avoided much of the market's US inspired selling on Friday, did not escape the widespread market weakness yesterday.

The FTSE 250 finished 28.0 off at 4505.8 and the SmallCap index ended 8.3 down at 2289.2.

The one relief for market makers and dealers was that the latest weakness was again not accompanied by any large scale selling from the big institutions. The funds have stayed on the fringes of the market.

They have only ventured in to nudge up weightings in the utili ties since news that Mr Tony Blair, the Labour leader, had disagreed with Mr Gordon Brown, the shadow chancellor, over the extent of a windfall profits tax.

Utilities stocks were among the market's best performers last week and continued that trend yesterday. One utilities specialist commented that the Blair/Brown rift was behind the persistent support for the sectors.

Turnover yesterday reached 652 million shares at 6 p.m. with nonFTSE 100 stocks accounting for about 52 per cent of the total.

The value of customer business transacted in the market contracted last week, slipping below £2 billion on two occasions - a clear signal that fund managers are reluctant to shift allocations so close to the general election.