The violence in the Middle East put paid to the FTSE 100's attempt to mount a rally from Wednesday's heavy losses. The release, after the US close on Wednesday, of better-than-expected figures from Advanced Micro Devices ushered in the prospect of a rally on Nasdaq and ensured a good morning for technology stocks. But the market was then beaten back by negative news of the killing of Israeli soldiers, the attack on a US Navy ship, the retaliatory attacks by Israeli helicopters and at the corporate level, a profit warning from retailer Home Depot.
With oil bouncing $4 a barrel to a new 10-year high at one point, the US stock market suffered a sharp sell-off. The Dow Jones Industrial Average was down 319 points in early trading. The two factors that have plagued the market since the start of September - high oil prices and profit warnings - had combined to hit share prices again. In the end, it was a tribute to the London market's defensive qualities that the FTSE 100 ended with a small gain. It still represented a big fall from its best level of 6,211.8, up 94.2, just before the Wall Street opening. Strength in the oil majors helped, of course, but there also seemed to be a sense that the index was finding support at the bottom of its long-running trading range. Footsie's close on Wednesday was its lowest level since late May.
"There was definitely the feeling in the morning that the market wanted to recover on the back of the Advanced Micro Devices figures," said Tony Jackson, equity strategist at Charterhouse Securities. "But at the moment, it's one piece of bad news after another. I'm not sure, at the close, that Footsie was up with events."
The other FTSE indices failed to make ground. Most disappointing of all for the bulls was the failure of the Techmark 100 to rebound on the back of the AMD announcement. The index, already 40 per cent down from its March peak, slipped a further 38.52 to 3,401.59.
Bookham Technology lost further ground after Wednesday's 14 per cent fall.
In the circumstances, it was perhaps surprising there were few signs of a flight to quality. Gilts only advanced by around a tenth of a point. However, Nick Glydon, technical analyst at Chase/Robert Fleming, said there was a clear "head-and-shoulders" pattern between shares and gilts, indicating that investors should buy bonds and sell equities.
British Airways was the biggest loser in Footsie, given its vulnerability to high oil prices and the resurgence of international terrorism. The other main sector to suffer was retailing, where sentiment was hit by reports of falling profits at Marks and Spencer's food division.
Turnover was up with the level of the previous two sessions, with 1.83 billion shares traded by 6 p.m.
