Erratic direction changes in volatile day's trading

A big switch from many of the recently outperforming old-economy/ defensive areas of the market back into more economically sensitive sectors was behind some heavy changes of direction in a volatile London stock market yesterday.

That big shift of direction, inspired by the strategy team at Deutsche Bank, plus a sharp dose of profit-taking on Wall Street, was partly responsible for an erratic showing by the various FTSE indices.

There was a sharp reversal in sentiment in the recently buoyant oil sector, where the oil majors and second liners plummeted as crude oil prices dropped below $27 a barrel.

Another area of exceptional weakness was the pharmaceuticals sector which, on the wrong end of the Deutsche Bank recommendations, was another big contributor to the FTSE 100's reversal.

At the finish of a slightly confused trading session, the FTSE 100 ended 25.7 off at 6,273.3, having moved in a wide trading range, climbing 66.6 during initial exchanges but then reversing and posting a 40-points fall shortly after Wall Street opened.

Wall Street continued to call the shots for London. The early surge in UK stocks was a reflection of the stunning performances of the Dow Jones Industrial Average and the Nasdaq Composite overnight, which saw the former climb 3.2 per cent and the latter by a record 10 per cent.

These rises followed news of an end to the US presidential election debacle with the expected victory of George W. Bush as US president and remarks by Alan Greenspan, chairman of the Federal Reserve.

Mr Greenspan's speech was interpreted as indicating a soft landing for the US economy and the likelihood of the next shift in US interest rates being downwards.

But the unsettled tone of global markets yesterday followed the profits warning issued after Wall Street's close by Apple Computer, the latest in a sequence of bearish news from the US tech-related sector.

The more junior indices resisted the downside effects brought by the shift of sentiment in many of the market's heavyweight stocks, specifically the oils and pharmaceuticals.

The Techmark 100 extended Tuesday's big rally, following up a 5.5 per cent rise with a further gain of 113.3, or 4.2 per cent, a rise considerably boosted by the exceptional strength of Vodafone Group, the UK's biggest company by market capitalisation. The FTSE 250 jumped 32.8 to 6,534.7, and the FTSE SmallCap 32.1 to 3,281.8, with both indices sprinkled with tech winners.

The Bank of England's monetary policy committee began its regular monthly meeting yesterday with the outcome of its deliberations due at midday today.