Footsie's driving ascent stumbles

The London equity market's drive to new peaks ran into the buffers yesterday on a mixture of worries. The principal downside factor was said to have been an influential survey highlighting the British public's hostility to European monetary union, which upset gilts.

The latter have been moving sharply higher since an authoritative report said the government has warmed to European monetary union. Adding to the stock market's discomfort early yesterday was Wall Street's rather disappointing closing performance last Friday.

The Dow Jones Industrial Average had finished only 12 points up on the day, after posting a three-figure rise during early trading. The September non-farm payroll report showed a smaller than expected increase in new job creation.

Finally, a burst of good old-fashioned profit-taking took share prices lower. Dealers were unsurprised at the flurries of profit-taking, pointing out that the FTSE 100 index has risen 489 points, about 10 per cent, since the middle of last month.

But London closed well above the session's lows, responding to a fresh burst of strength on Wall Street yesterday. The Dow pushed up more than 60 points in quick time, before easing off its best as London closed.

Footsie settled 30.8 lower at exactly 5300, substantially above its session low of 5268.0, reached an hour after the market opened when the Emu and profit-taking stories were at their height.

But losses in the other FTSE indices were much more modest, with the FTSE 250 index slipping 16.5 to 4,867.4, against a session low of 4,866.9, and the FTSE All-Share index 12.16 off at 2,480.25.

There was good news for investors in smaller stocks, which have under-performed the FTSE 100 and 250 indices for over 15 months. The SmallCap index actually made good progress, posting a 4.0 gain at 2,364.8, a fraction off the day's best and only 9.4 off its closing record, reached on March 12th.

Dealers said the shake-out in UK stocks was not seen as the start of a long-term correction by the market. "We were due a dose of profit-taking and we've had it," said one market-maker glad to have been able to replenish a depleted trading book. Turnover in equities was 673 million shares, with non-FTSE 100 stocks accounting for 55 per cent.

There is plenty of news to occupy the market for the rest of the week, the most important of which is the domestic inflation report for September, due this morning. The data are expected to show headline inflation of about 3.4 per cent higher on the year and core inflation running at 2.6 per cent.