A PREDICTABLE element of caution crept into London's equity market yesterday, taking the leading indices off their recently attained peaks.
With monetary policy making meetings scheduled in Washington today, London tomorrow and Frankfurt on Thursday, dealers were not prepared to risk being caught either too long or too short of stock in the event of shifts in interest rates.
The day's British economic news, provisional MO money supply details and the Purchasing Managers' Index for January, came in slightly higher than consensus forecasts but caused no real problems for the market.
Nor did the bulk of the economic data from the US, which included personal income and consumption figures for December, construction spending for that month and the National Association of Purchasing Management index for January.
By the close, the FTSE 100 index showed an 18 loss at 4,252.8, well above the day's lowest point, 4,252.8, which was recorded shortly after the British PMI and MO news.
Second liners were also in the firing line, with the FTSE Mid 250 index closing 20.5 off at 4,574.9. The index suffered from another sell off in the cable and television companies which are not involved in the newly formed British Digital Broadcasting alliance, seeking a licence to provide a digital terrestrial television service in Britain.
It was not all gloom, however, with the SmallCap index rushing up again and recording a new intra day and closing high of 2,308.2, up 2.6.
The head trader at one of the big European banks said: "It was a quiet Monday at the start of a big week for stats and interest rate meetings it's hardly surprising that we lost ground."
There was comfort for equities in the good showing by gilts. But some dealers, pointing to the latest strong performance by sterling against the dollar and the D Mark, said currency pressures could begin to exert further pressure on equities, especially the big exporters such as the drug and oil stocks.
The growing speculation about the timing of the British general election, plus the controversy over a single European currency, which has been seen by some observers as possibly triggering an exodus of manufacturers, were other factors unsettling London stocks.
Sentiment in the US stock market was affected by the impending Federal Open Market Committee meeting. The Dow Jones Industrial Average began the day under pressure, retreating almost 40 points. Turnover in British shares gave further cause for concern, with customer business last Friday coming out at £906.9 million sterling,
Marketmakers attributed the extended slump in turnover to the proximity of the election and to fears that a shift in US interest rate policy could trigger a steep correction on Wall Street and global markets.
