The UK market suffered its second consecutive losing session, as another poor opening on Wall Street weighed on sentiment.
The Dow Jones Industrial Average followed up Tuesday's triple-digit loss with a similar decline when Wall Street opened. Tuesday's weaker-than-expected consumer confidence numbers seem to have provoked some profit-taking in New York, which had rallied 20 per cent since the lows of September 21st. Worries about the financial health of energy trader Enron also weighed on US stocks.
The FTSE 100 reached its low for the day of 5,182.2, down 83.8, at lunchtime when the futures market indicated early Wall Street weakness.
Blue-chip stocks staged a modest rally in mid-afternoon but slipped again towards the close, with Footsie ending 60.8 lower at 5,205.2. That takes the index back towards the 5,000-5,200 trading range it occupied for much of October. The other main indcies were lower. The FTSE 250 fell 53.9 to 5,877.9, the SmallCap 22.1 to 2,597.3 and the Techmark 100 49.59 to 1,493.1.
Breweries performed strongly in the face of the market trend, thanks to bid speculation about South African Breweries. SAB was the best performer in the FTSE 100, followed by Scottish & Newcastle. There was also bid talk surrounding Securicor.
But technology stocks continued Tuesday's weakness following Nokia's sales forecast reduction. ARM and Sage were two of the worst six Footsie performers. Technology stocks have led the market's recovery since the September 21st lows, largely on the grounds that "what goes down must come up".
Credit Suisse First Boston says investors closed their underweight positions in technology and telecoms in October and are now significantly overweight in tech. Energy and basic materials are now their main underweight positions.
ABN Amro's strategy team argues that "the FTSE 100 has made strong gains on the basis that the corporate and economic newsflow cannot get any worse from here. This may be so, but it neglects the probability that the operating environment may remain difficult for longer than the market currently assumes. The outlook for profits remains difficult, valuations are not particularly compelling and the easy-to-swallow medicine of interest rate cuts has largely run its course."
