US bonds continue to unsettle London bulls

A fresh bout of weakness in the US bond market put paid to a relatively robust performance by British equities yesterday. Earlier, bolstered by another batch of mostly well received company results, London had shrugged off the disappointment of domestic interest rates being left unchanged.

The Bank of England's Monetary Policy Committee (MPC) decided to leave rates on hold for the first time in six months. Interest rates were cut subsequent to the previous five MPC meetings.

Dealers said the market's positive showing, both before and after the MPC news and before the late sell-off, was a clear demonstration by the bulls that the recent bout of weakness, during which it fell almost 250 points or around 4 per cent in three days, had been overdone.

But they also warned that London faced some daunting hurdles over the next few days - the US non-farm payroll report for February, scheduled for tomorrow, and next Tuesday's British budget.

The FTSE 100 was supported for much of the day by exceptionally good earnings reports from GKN, one of Britain's leading engineering groups, and relief over the extent of the Asian bad debt provisions made by leading merchant bank, Schroders.

After withstanding an early small bout of selling, the FTSE 100 made rapid progress in mid-session, posting a 54.7 gain at 6,116.0, before dipping away late in the day to finish a net 13.0 lower at 6,048.3.

Turnover in the equity market topped the one billion shares mark for the first time in three sessions, eventually reaching 1.01 billion shares. FTSE 100 stocks accounted for just over 50 per cent of the total.