US profit warnings cause Budget bloom to wilt

An initial flush of enthusiasm following a much closer overnight scrutiny of Gordon Brown's Budget was gradually eroded during yesterday afternoon. The turnaround came in the wake of more profit warnings from the US both late on Wednesday and again yesterday, which took some of the wind out of the sails of an earlier rampant telecoms sector.

The outcome of a tense and turbulent afternoon saw the FTSE 100 just manage to scramble back over the 6,000 level and finish 1.4 higher at 6,003.2. The late reaction in the FTSE 100 brought that index back into line with the performance of the other main indices which, apart from the Techmark 100, were always struggling.

Even the Techmark 100, which moved higher during the morning period, stimulated by strong gains in the telecoms/techs sector, ran out of steam during the afternoon, eventually closing the day 7.49 lower at 2,386.67. At its best of the day, when the telecoms stocks, led by Vodafone, were moving ahead strongly, the Techmark 100 was up 23.38 at 2,417.54.

Of the day's main events there was no surprise at the decision of the Bank of England's monetary policy committee to leave domestic interest rates on hold after its two-day meeting. While economists had not expected a shift in rates, dealers said there had been some super optimists taking the view that if indeed there were to be a May 3rd election, then perhaps the monetary policy committee would have nudged rates down by 25 basis points; a cut in rates in the run-up to a general election would be most unlikely, it was suggested.

The early gains in London were encouraged by the US economic news in the form of the Beige Book, which sets the agenda for the March 20th meeting of the US Federal Reserve's rate-setting open market committee.

The Beige Book indicated a near standstill in the US economy and was being interpreted as indicating increased scope for another cut in US interest rates after the meeting.

Equity turnover was 2.25 billion shares.