Market may be running out of steam

LEADING British shares hit further highs yesterday. But there were distinct signs that the market could be running out of steam after its recent breathtaking run.

There was a big gap between the opinions of various marketmakers with some taking the view that London was displaying signs of fatigue and others unperturbed at the market's rather slow performance yesterday, putting it down to the usual market lethargy at the start of the week.

The FTSE 100 ended a net 6.7 up at a peak closing level of 4031.5 - its third record in four trading sessions - but well below its intraday best of 4046.8 shortly after the start of trading.

Other FTSE indices also struggled to make real progress, with the FTSE Mid 250 managing a meagre 3.1 gain at 4441.0 and the FTSE SmallCap finishing 1.6 up at 21802.

An uncertain opening by Wall Street - it gyrated within 10 points either side of the 6000 level on the Dow Jones Industrial Average shortly after the opening - did nothing to boost confidence in London.

But the influence of last Friday's 60 point upsurge in the Dow, following the surprising fall in September's non farm payroll, had been much in evidence at the outset.

Although nowhere near as strong as some market optimists had expected, the FTSE 100 kicked off the session over 18 points higher and hit its all time intraday high within 30 minutes of the opening.

But with gilts slipping away and never looking like making any progress, support for equities began to wane. Share prices consequently came well off their best levels and finished the day struggling to stay in positive territory.

Dealers said London's problems were political rather than economic. Industrial production and manufacturing output data for September, released yesterday morning, came in much lower than forecast, and were interpreted as lessening the pressures for a British interest rate rise.

The shadow of the "cash for questions" affair; the defection of Lord McAlpine, former Conservative party chairman; and reports of a simmering dispute among leading members of the cabinet over the single European currency, were all said to have unsettled the market.

The oil majors came to the market's rescue, with Shell and BP both hitting new all time highs, helped by keen interest from the US. Shell's confirmation of a potential merger of its refining and marketing operations in the US with those of other oil groups put the seal on another scintillating performance by the shares, which closed comfortably above £10. BP also hit a new record.

Turnover in equities was only 83.6 million shares at the 6 p.m. count.

Customer business on Friday was valued at £1.94 billion.