It was a disappointing start to the week for a London equity market which suffered from the now familiar reluctance of fund managers to get too closely involved on a quiet Monday in the middle of summer.
After a rather depressing trading session, which saw the FTSE 100 drive briefly back above the 6,500 level, the index ended a net 31.3 lower at 6,466.2, just above its low of the day of 6,463.3.
The lack of enthusiasm for the leaders was not so apparent in the second and third ranking stocks, represented by the FTSE 250 and SmallCap indices. Both managed to record minor gains, the latter finishing 7.0 up at 3,380.6 and the former 11.1 firmer at 6,637.7.
But another dismal showing by many of the tech stocks - with the notable exception of Bookham Technology, which topped the FTSE 100 performance list - left the Techmark 100 a sorry looking 41.88 lower at 3,404.75. Bookham's 10 per cent gain came in the wake of a $41 billion (€43 billion) merger of two North American fibre-optics groups.
There were plenty of reasons for the market's inability to follow through last Friday's Wall Street-inspired surge, which was provoked by a smaller-than-expected increase in the US non-farm payroll in June.
Much of those US gains, which saw the Dow Jones Industrial Average up 154 points and the Nasdaq up 62 points, took place during London trading hours.
The early uptick in the FTSE 100, which took the index up to a session-high of 6,515.2, was quickly eroded by higher than expected data on UK producer prices. Output prices rose 0.4 per cent in June for a year-on-year rise of 2.9 per cent, while input prices were up 1.4 per cent, for a year-on-year gain of 14.1 per cent.
Those increases were viewed as a reflection of the rise in crude oil prices during the month, but nevertheless caused ripples of unease around the market.
Dealers are now bracing themselves for today's inflation data for June, which are expected to show a small increase in both the headline and core numbers. Tomorrow brings average earnings numbers for last month, one of the most closely watched economic news items.
It was not only the economic numbers that were causing flutters around the market. In its weekly strategy note the strategy team at Credit Suisse First Boston said: "While brighter news on the interest rate front has eased the pressure on equity valuations, concerns are shifting towards earnings estimates, which we believe look set to crack in the months ahead as global growth slows."
CSFB sees cyclical stocks "continuing to struggle", and said its preferences "still rest with the classic defensive sectors". Its top picks "from both a top-down and bottom-up regard" include CGNU, Imperial Tobacco, Safeway, Scottish & Southern Energy and Shell.
