Small stocks leave FTSE 100 in summer shade

If any evidence were needed of the impact of the summer holiday season on the performance of London's equity market then it was delivered yesterday.

London stubbornly refused to follow Wall Street's lead yesterday afternoon, with the FTSE 100 index finally posting a disappointing 2.8 decline at 6,384.5, ignoring a powerful upside performance by Wall Street which gathered momentum after a rather indifferent start. Down 38.9 at its worst of the day, the 100 index did manage to claw its way back in the last half hour of trading but it never looked happy in doing so.

Once again the poor performance of the top 100 shares did not deter buyers of the second and third-ranking stocks where the FTSE 250 moved up a further 19.2 to 6,842.2 and the SmallCap put on 8.2 to 3,397.1. The driving force behind the 250's move came from Laporte, the chemicals group, whose shares raced higher amid renewed takeover speculation.

The Dow Jones Industrial Average was up more than 100 points as trading in London finished. Behind the Dow's sparkling performance were some crucial but conflicting economic data. That showed an absence of inflationary pressures affecting the US producer price index for July which came in unchanged, although market enthusiasm was countered by a much higher than expected 0.7 per cent increase in US retail sales for the same month.

Despite the conflicting data issued yesterday, the general view in the market is that the US Federal Reserve's open market committee will leave interest rates on hold after its meeting on August 22nd.

There were suspicions among dealers in London that the market's reluctance to follow the Dow had more to do with at least one sell programme, and renewed weakness in Vodafone Group, by far and away the heaviest weighted stock in the FTSE 100 index. Vodafone's fall alone counted for 13.5 Footsie points.

Balancing that was a powerful showing by the oil majors, BP Amoco and Shell, which gave a ready response to the recent uptick in crude oil prices, and a bounce by the pharmaceutical stocks after Thursday's losses.

Turnover of 1.41 billion shares was the second highest of the week and was boosted considerably by a big placing of shares in Corus, the steel group formed by the merger of British Steel and Hoogovens of the Netherlands.

Schroder Salomon Smith Barney embarked on a placing of 129 million Corus shares on behalf of a single client. About 194 million Corus shares changed hands, together with 154 million Vodafone Group shares. Those two stocks accounted for a quarter of total market volume.