The FTSE 100 index suffered a modest decline yesterday but still managed to close above 5,000. Equities spent the day trading in a fairly narrow range as investors focused on US military attacks on Afghanistan, the potential for terrorist retaliation, and the effect on the economy and the corporate sector.
The Footsie began the day with a modest decline, partly in reaction to the Dow Jones Industrial Average's 50-point decline on Monday. At its worst, the blue chip benchmark briefly dipped below 5,000, hitting 4,997, down 35.7. But the market then recovered throughout the morning led by Marks & Spencer, which pleased investors with a rise in sales. M&S shares ended the day with a gain of almost 10 per cent, the best performance in the FTSE 100. At its best, Footsie gained 46.5 to 5,079.2.
The rally evaporated in the afternoon, however, as the Dow shed another 50 points in the first hour of trading and by the close, the FTSE 100 was off 22.9 at 5,009.8.
Having rallied back to the levels recorded before September 11th's terrorist attacks, the markets appear to have gone into a state of limbo. While there have been no further confirmed terrorist attacks in the US, a second case of anthrax in Florida has made investors nervous. And the markets are also concerned about the prospect for land-based attacks by US forces on Afghanistan.
On the other hand, central banks and governments have given a lot of stimulus to the global economy and that has reassured investors who were worried that the attacks would lead to a recession. But further economic data will be needed before the impact of the attacks becomes clear.
There were no domestic UK economic data yesterday but profit warnings or gloomy trading statement continued to beset the smallcap sector, with stocks such as Aviation Partners, Diagonal, Gaucho, Landround and Surface Technology all suffering. St Ives, a FTSE 250 constituent, warned of an uncertain outlook, and saw its shares fall 3.5 per cent.
Turnover picked up from Monday's levels with 2.22 billion shares traded by the 6 p.m. count. Vodafone provided just over a fifth of overall market volume. There were 124,000 individual trades conducted.
