London's rearguard action fails

LONDON'S equity market fought gamely but unsuccessfully to resist the bearish influences from across the Atlantic where Wall Street followed up last Friday's sell off with another uncertain showing.

The Dow Jones Industrial Average, which fell over 153 points on Thursday and Friday, was down over 40 points shortly after the start of trading in New York yesterday but rallied to show a small gain 90 minutes after London closed.

Helped by a £230 million counter bid for Newman Tonks and a series of bullish stories emerging in the pharmaceuticals and other sectors, the FTSE 100 index recouped an initial decline before slipping again in the afternoon and closing on a dull note. It settled 6.8 down at 4,212.0.

Further pressure was brought to bear on the stock market with talk of a large scale trading programme, executed late in the session by one of the big US brokers and weighted heavily on the sell side.

Dealers said the full impact of the programme had not been felt in the market by the close and would probably cast a shadow over equities at the outset of trading this morning.

The other FTSE indices also showed relatively minor changes, with the 250 ending 4.9 down at 4,593.1 and the SmallCap 0.5 easier at 2,291.9.

News that fourth quarter gross domestic product had risen 0.8 per cent, giving an annual 2.6 per cent rise, was seen as a calming influence during the morning, although gains from the news proved only fleeting.

The rise in GDP was exactly in line with market expectations and seen by some as vindicating the decision by Mr Kenneth Clarke, the Chancellor of the Exchequer, not to increase British interest rates after his last meeting with Mr Eddie George, the governor of the Bank of England.

One casualty of yesterday's subdued trading session was the level of turnover in the market. At the 6 p.m. count turnover was 685 million shares.

Dealers said activity in equities had fallen away sharply last week, when the value of customer, or retail, business fell below the £1 billion mark for three out of the five trading days. Institutions are said to be holding off from the market because of its increasing volatility.

Drug stocks extended last week's strong gains, on a mixture of fundamentals and continued bid merger speculation, which drove Zeneca and SmithKline Beecham ahead.

Glaxo Wellcome was lifted by positive news on one of its anti Aids preparations.

Oil exploration stocks attracted keen support amid speculation of further drilling success for Enterprise Oil, the second best performer in the Footsie last year.

But the food retailers took another hammering after one of the independent retail research houses forecast an extensive and margin damaging price war.

Market makers remained on red alert for further takeover stories but were also aware of the scope for a sell off in global markets.