US rate fears make for generally gloomy mood

It was another lacklustre performance by London's equity market yesterday, with all the main FTSE indices on the retreat, still burdened by concerns about the direction of US rates. But while the overall mood of the market remained gloomy, weakness in specific areas, notably telecoms and BP Amoco, helped push the FTSE 100 index lower.

At the close, Footsie was down 92.5 at 6,123.8, having fallen 103.4 at its worst, when the Dow Jones Industrial Average saw an early 81-point gain transformed into a 31-point decline.

The FTSE 250, meanwhile, dropped 35.5 to 6,272.6, only just above its session low of 6,270.9, while the SmallCap just managed to stay above the 3,200 level, closing 12.8 off at 3,200.6. The Techmark 100 fell away sharply late in the session to end 99.04 off at 3,634.87.

Adding to the market's woes was another session of moderate trading volumes. Turnover levels have dropped sharply recently, affected by bank holidays.

While yesterday was an improvement on Monday, business was not back to first-quarter levels, with 1.5 billion shares traded by the 6 p.m. cut-off point.

And that figure was boosted considerably by another session of heavy activity in Vodafone AirTouch which accounted for 240 million shares, or 16 per cent of the total.

London tried hard to stage a rally at the outset, with the FTSE 100 moving up 26 points during the first half hour before giving up the struggle in the face of the marked weakness of telecoms stocks.

But it was also noticeable that the decline in the market encompassed the FTSE 250 and Small Indices which have managed to make minor progress recently despite the weakness of the FTSE 100 index.

Dealers said the early advance by the 100 index was a reflection of the overnight performance of the Dow Jones Industrial Average, which managed to finish the session with a 25.77 gain, having been down 55 points at one stage.

Against that, however, the Nasdaq was always in negative territory on Monday and finished at its lowest point of the US session.

Sterling provided only marginal help to the market, with the Bank of England's Exchange Rate Index finishing off 0.5 at 110.6.