Footsie still negative despite Vodafone buyers

Another nervous opening performance on Wall Street ensured that the FTSE 100 index lost ground for the third successive session.

There was also more evidence of portfolio switching as investors struggled to get a full weighting in Vodafone AirTouch as the mobile phone group confirmed it had taken full control of Mannesmann's share capital.

Vodafone was by far the strongest stock in the FTSE 100 index gaining 10.8 per cent on the day in 951 million shares traded.

At the start of the session, it looked as if the market was set for a revival. Within five minutes, the FTSE 100 index was up 91.2 points at 6,172.8. But that turned out to be its best level of the day.

Wall Street had been closed on Monday after Friday's big drop and there were hopes that the market would revive as it opened yesterday. But the Dow Jones Industrial Average failed to make much ground and slipped to being 60 points lower as London closed, while the tech-heavy Nasdaq index was more than 100 points off.

The fundamental background of the British market was quite favourable; sterling lost ground against the euro (thereby helping the export sector) and the benchmark 10-year gilt gained three-quarters of a point.

But the blue chips could not resist the pull of Wall Street and Footsie looked in danger of slipping below 6,000 again. At its low for the day, it was off 78.9 at 6,002.7, before recovering a bit to close 66.9 off at 6,014.7.

There were more signs of a revival in the unloved "old economy" stocks with Scottish & Newcastle, Whitbread and Bass all featuring among the best performers in the FTSE 100. The small cap and medium-sized stocks performed much better than the blue chips. The FTSE 250 gained 21.8 to 6,318.4 while the SmallCap rose 27.6 to 3,271.2.

Standard Life Investments, the fund management arm of the Scottish insurance giant, says it has been cutting its exposure to the British market. In its March review, Standard cites the likelihood of higher interest rates and a deteriorating profit outlook.

"Analysts have already begun to cut profit forecasts for this year and it is only February. Sterling strength against the euro combined with a more competitive environment, partly caused by the arrival of e-commerce, is starting to erode the potential for profit growth. While investors digest the full extent of the reduction in analysts' forecasts and until they believe the next move in interest rates is downwards, the market is likely to be more volatile than normal."

Volume was 2.83 billion shares by the 6 p.m. count.