INTEREST rate fears gripped the City, sending the FTSE tumbling more than 40 points and making the 4000 barrier seem as elusive as ever.
Economists are convinced the meeting between the Governor of the Bank of England. Mr Eddie George, and the Chancellor of the Exchequer, Mr Kenneth Clark, will produce no relaxation in interest rates.
However, they believe there is far more likelihood that US rates would go up tomorrow, when the Federal Reserve Board's policymaking committee meets. By the close of dealing the FTSE was down 44.4 at 3919.7.
Buyers were conspicuous by their absence in a market which was dominated by companies beginning the week without the benefit of a dividend payout.
Economist Mr Corey Miller at Credit Lyonnais Laing described the stock market as looking a "little stretched", and he did not anticipate the FTSE index moving far from current levels.
Sharp falls by several major companies going ex dividend - including Shell down 24p to 969p, RTZ off 17p at 934 1/2p, BTR 14p weaker at 268 1/2p and British Aerospace 16p down at 1040p prompted the FTSE to fall.
Cable & Wireless bucked the market with a rise of 1 1/2p to 455 1/2p on speculation of a possible major restructuring programme involving large scale sell-offs.
The main company news was away from the FTSE where a stream of medium sized groups reported results.
Inchcape, the car distribution and marketing services group, contained few surprises and confirmed its planned hiving off of its testing services and Bain Hogg insurance broking operations was still on course. The shares were marked down 10p at 292 1/2p.
Merchant banking group Close Brothers produced a sparkling set of annual figures, its 21st year of successive profits growth. Confidence that it is on course for bigger and better things pushed the shares up 3 1/2p to 343 1/2p.
Lloyds TSB, which is taking full control of Lloyds Abbey Life, yesterday reported that trading was "satisfactory", but it slipped 7p to 372p.
A newspaper buy recommendation sent Rolfe & Nolan, the computer software group, ahead 5p to 387 1/2p.
Profits at pubs group Regent Inns almost doubled to £8 million, which prompted a dramatically increased dividend payout. The figures had been expected, however, and the shares slipped 2p to 234 1/2.
A profits warning from kitchens group Berisford sent investors running for cover and the stock plummeted 40 1/2p to 106p.
A similarly gloomy outlook from business support services group Proudfoot sent it diving 3 1/2p to 27p; while Aspen Communications, the media and printing group, was also cautious about the short term and lost 10p to 194p.
Major changes were: Berisford 106p down 40 1/2p, Rolfe & Nolan 387 1/2p up 5p, Inchcape 292 1/2p down 10p, Bemrose Corporation 362 1/2p up 20p, Proudfoot 27p down 3 1/2p, PizzaExpress 472 1/2 up 26p.
