Footsie drops below 5,400 as pressure mounts on TMTs

More downside pressure was brought to bear on London's equity market driving the FTSE 100 index down for the second consecutive day and leaving all the other main indices with losses.

At the close, the FTSE 100 had dropped back through the 5,400 level to close a net 71.8 off at 5,389.8, while the 250 index was down 7.6 at 6,132.4 and the SmallCap down 2.8 at 2,729.0. The Techmark 100 lost another 20.37 to 1,503.66, having fallen to 1,491.29 at its worst.

Dealers said there were plenty of reasons for not chasing the market. Among the most potent of these, they said, was the worries about the weakness of the dollar and Wall Street.

"Every pundit on the planet is talking the dollar lower and that is troubling Wall Street. That sort of backdrop hardly inspires confidence in European markets", said one market maker. The Dow Jones Industrial Average dropped 66 points overnight and the Nasdaq Composite, which is closely watched by investors in British TMT (technology, media and telecom) stocks, was even weaker, sliding another 45 points, or 2.2 per cent, to its lowest level for around four months.

Wall Street is pinning its hopes on the US Federal Reserve's open market committee delivering another 25 basis points reduction in US interest rates next week.

But there were more doubts being cast on the recent assumption that another reduction in British interest rates could be on the cards after the retail sales data showed a stronger-than-expected 0.6 per cent increase, compared with a consensus forecast of 0.4 per cent. Add to that the further fall in unemployment and stronger-than-expected average earnings numbers for the June quarter, and the doubts about rates keep growing.

The heaviest pressure was on the TMT sectors which reflected the Nasdaq's slide, while some of the FTSE 100's most powerful props in recent sessions turned easier, notably BP, whose shares dipped as Deutsche Bank turned more cautious on the shares. Marconi took another bruising, as did Energis and Vodafone.

It was left to the old economy stalwarts to provide the winners. They were led by Six Continents, formerly known as Bass, which was driven higher by a powerful recommendation from Lehman Brothers.