Nervous Footsie surrenders gains

A SHARP sell off in gilts amid a flurry of rumours that a snap general election could be in the offing, plus increasing worries about interest rates, saw British shares give back all of Tuesday's gains.

Those fears, coupled with increasing irritation across Europe at the see saw performance of Wall Street, saw the FT-SE indices retreat in disarray.

The FT-SE 100 index ended a disjointed session 29.9 lower at 4,207.5, having lost the 4,200 level as markets awaited the opening of Wall Street. The 250 index meanwhile, gave up 16.2 to 4,566.5, while the SmallCap index held up extremely well to close only 0.2 easier at 2,292.2.

Capping a difficult day in the market was a profits warning from Premier Farnell, the electronic controls group, which issued a statement only minutes before the close, prompting its shares to fall over 8 per cent.

A dealer summed up the market's unhappiness with events. "The market feels very choppy: there is uncertainty in bond markets here and in the US; everyone is getting worked up about the general election date and absolutely no one trusts Wall Street," he said.

Wall Street was the main talking point and set the tone for the day. Up almost 100 points within 30 minutes of the start of trading on Tuesday, the Dow Jones Industrial Average subsequently finished down four points and struggling.

The fifth straight decline in the US market, which has seen the Dow fall almost 200 points, prompted a general markdown of British stocks. They fell further after the release of the minutes of the December 11th meeting between Mr Kenneth Clarke, the Chancellor of the Exchequer, and Mr Eddie George, governor of the Bank of England.

The minutes disclosed that the governor had pushed for an immediate increase of 25 basis points and that, in the absence of such a rise, an increase of 50 basis points would be needed in the first part of the new year.

With Footsie slipping away, there was further unease around trading desks at rumours suggesting that an election date would be announced later in the day, a story subsequently denied.

Wall Street came in firmer yesterday, putting on 40 points within an hour of the opening, after a weak US durable goods orders figure for December. It was still around 25 points ahead 90 minutes after London closed.

There was more dismay for stockbrokers, with the latest turnover figures showing that genuine retail business on Tuesday dropped to £733.7 million sterling, the lowest since January 7th. At 6 p.m. yesterday turnover had reached 810.7 million shares.

The retail sector continued to attract plenty of attention with shares in Marks & Spencer, the flagship of the department stores, giving a disappointing response to what many saw as respectable Christmas trading figures.