Pressure over BSE upsets equities

THE political fall-out from the mad cow disease controversy continued to cast a shadow over British equities and was said to have been responsible for another dismal performance by the stock market.

With dealers increasingly taking the view that the British government will struggle to recover from the political and potential economic impact of the BSE scare, gilts were persistently sold throughout the day and the FTSE future traded at a big discount to the cash market.

And some of the market's bears were casting doubts about today's auction of £3 billion sterling of five-year gilts. The 10-year gilt closed off the day's lows but was still 12 ticks lower at the close. The 20-year gilt was 14 ticks easier.

The outcome of a difficult trading session in London was that the FTSE-100 index once again waved goodbye to the 3,700 level. By the close, it was left nursing a 21.0 fall at 3660.9.

There was much less pressure on the second-line stocks, where another outstanding performance by Securicor, up 11 per cent after Monday's restructuring proposals, helped sustain the FTSE Mid-250 index which closed 2.0 down at 4294.5.

Wall Street gave precious little support to London, with the Dow Jones Industrial Average coming in on the weak side and falling sharply in the first 30 minutes of trading before staging a good rally and posting a small gain soon after that.

Late in the session there was news that the US Federal Open Market Committee meeting had finished and that US interest rates had been left unchanged.

Commenting on the day's events, the head trader at one of the leading UK securities houses said the institutions were worried about the political implications of the BSE scare. "The feeling is that the government is in real trouble and that things will probably get much worse before they get better." he said.

Last week's burst of programme trading activity had also left the market heavy of certain stocks and caused considerable indigestion, he said.

On the plus side, however, the view in the market was that the FTSE-100 was being depressed by a big short position in the future, which, if unwound, might produce a sharp rebound.

It was not all doom and gloom in the market. Glaxo Wellcome shot to the top of the FTSE-100 leader board, in the wake of a burst of speculative buying triggered by the emergence of rumours that a merger between it and Pfizer of the US could be on the cards. Most traders, although keen to take advantage of the big two-way business unleashed by the rumours, were unconvinced that such a deal was imminent.

Turnover at 6 p.m. came out at 822.8 million shares.