Footsie unable to resist selling wave

The London stock market proved unable to resist the wave of selling that swept across world bourses yesterday and continued its recent decline.

A further fall in the Japanese yen in Asian trading - it dipped below 146 yen - created more nervousness in the region's currencies and equity markets. The Hang Seng index in Hong Kong fell 5.7 per cent while the Nikkei 225 average in Tokyo closed below 15,000. Most of the south-east Asian markets fell by 4-5 per cent.

Europe followed the Asian markets down and when Wall Street opened it added to London's woes by dropping sharply after a profits warning from Minnesota Mining and Manufacturing. In early trading, the Dow Jones Industrial Average fell to a 100-point loss.

The 3m warning reinforced one of the market's most persistent fears - that the slowdown in Asian economies will have an adverse effect on corporate profits. According to IBES, the information group, UK earnings forecasts for the next two financial years suffered net downward revisions in May.

The FTSE 100 index started the day marginally ahead, but the screens quickly filled with red and by mid-morning the blue-chip benchmark was showing a triple digit loss. At its worst, Footsie was 123.7 points down at 5,646.1.

As afternoon trading started, the index was still more than 100 points down. But a late rally - inspired either by England's football victory or a modest rebound on Wall Street - meant that Footsie was only 54.1 points lower, at 5,715.7, at the close.

Nevertheless, the decline meant the FTSE 100 index had shed 271.7 points or 4.5 per cent over the last three sessions. The market is now around 400 points below its all-time high, set in early April.

Mr Bob Semple, market strategist at BT Alex Brown, pointed to the rebound in sterling, which closed at more than DM2.96 yesterday, as another negative factor for equities. "That is bad news for the industrials, which have been doing well in the last quarter," he said.

The FTSE 250 index, which contains more industrial stocks than the Footsie, was a stark underperformer yesterday, dropping 111.2 points or 1.9 per cent to 5,750.0. The FTSE SmallCap index fell 25.2 to 2,730.8.

Heading the 250 index's fallers was Arriva, the motor group that issued a profit warning, and the Mirror Group, as German media company Axel Springer indicated it would not be bidding.

Considering there was a London Underground strike, and the distraction of England's first game in the World Cup, business was more active than might have been expected. Volume was 804.7 million shares by the 6 p.m. count, of which 54 per cent was in nonFootsie stocks.

Traders are more likely to be on their toes for the next two days, with the retail prices index for May out today and the average earnings and unemployment numbers due tomorrow.