A VERY disappointing market debut by a privatisation stock, renewed worries about Wall Street and a retreat by gilts produced a subdued performance by British stocks yesterday, driving the FTSE 100 index below 3,700.
British Energy's market debut, which produced the first discount to an offer price since the British government's privatisation programme was initiated in the 1980s, added to the gloom that has settled over the equity market in the past few weeks.
One leading stock market trader described the shares as "a dog stock in a dog market", and said their performance had been one reason why the institutions had been reluctant to push money into equities. "It is being taken by some fund managers as a signal that the bull market might have finally run its course", he added.
British Energy shares were always likely to be pressured on the downside, after last week's news that two of its nuclear plants had been closed down and also in the wake of bad publicity over the discovery of radioactive leaks at its Sizewell B plant.
Wall Street, which has come under heavy selling pressure over the past couple of weeks, during which the Dow Jones Industrial Average fell by over 100 points on two occasions, held up well on Friday but dropped again yesterday.
In London, the FTSE 100 was down 30.0 at 3,698.3, extending the decline over the past three trading sessions to 74.5, or 2 per cent. The bumper dividend payments at National Power were responsible for 10.2 points of the decline.
Dealers spoke of worrying developments in the biotech stocks, which feature prominently in the Mid 250 index. British Biotech was one of the poor performers in the sector, as traders fretted about the possibility of a poor take up of the rights issue, while Scotia Holdings and Chiroscience were other under performers in the sector.
British Energy apart, it was a disappointingly quiet day in the stock market. Turnover of 163 million shares in British Energy accounted for around a quarter of the total business. At the 6 p.m. count, turnover in equities reached 662.9 million shares. Retail business in the market last Friday was valued at £1.78 billion.
"London has no appetite for stock at the moment, the clients simply don't want to deal", said one leading market maker. He said investors wanted to see details of the Chancellor of the Exchequer's meeting with the governor of the Bank of England, held on July 5th, before taking any serious investment decisions. "If there has been a row over rates, the market will be very unhappy", he said.
