Scepticism reinforced by shaky start on Wall St

London's equity market moved back on the defensive yesterday, with international investors remaining sceptical that the deal thrashed out at the summit meeting in Egypt will ensure a viable ceasefire in the Middle East. The news from the summit eroded crude oil prices, hitting the oil majors, but the overall market view of the meeting was one of "wait and see".

The performance of Wall Street at the outset of trading yesterday upset an already twitchy London market. The Dow Jones Industrial Average, which performed reasonably well on Monday, closing 46 points to the good, fell heavily to post a near-150 point decline shortly after European markets closed for the day. The Nasdaq Composite, which has had to endure an even rockier road than the Dow, was down around 80 points at the same time. Wall Street remained concerned about the potential for more earnings surprises and profit warnings.

Losses in the stock market spread right across the board, with the FTSE 100 dropping back below the 6,200 at its worst of the day, when it touched 6,196.1, before picking up to finish the session a net 82.5 lower at 6,203.2. There were also falls in the junior indices, with the 250 index down 43.8 at 6,435.1, its lowest of the day, and the Techmark 100 84.81 off at 3,362.23. The FTSE SmallCap managed to resist the overall trend until the last few minutes of the session, eventually finishing a net 0.34 off at 3,250.8.

With the FTSE 100 and Techmark 100 indices under so much downside pressure it was no surprise that the biggest market casualties came from the TMT areas of the market, especially the telecoms, although another railway tragedy saw Railtrack shares plummet.

In its latest sector strategy note, the UK team at Merrill Lynch said: "Investors have had a rosy outlook on the world financial markets. Those views are currently being brought into question. There is very little evidence to suggest that investors have a good reason for losing those fears. Commodity prices are rising and central banks show little interest in cutting interest rates."

Merrill Lynch raised its stance on pharmaceuticals to neutral. Turnover edged up to 1.79 billion shares, with Vodafone leading the pack on 218 million shares traded, some 12 per cent of the total.