WORRIES about international bond markets continued to depress European equities and were mostly responsible for a disappointing performance from UK shares yesterday.
A twitchy start by Wall Street ahead of an $18 billion auction of two year bonds and the State of the Union address on US television by President Clinton also caused unease.
The market wide retreat by equities was all the more disappointing in the wake of the not unexpected victory by Granada in its hostile bid for Forte, the hotels to restaurants group.
Dealers, keen to see more bids emerging, had been hoping for a Granada success, which they said could pave the way for a spate of contested takeover battles.
But at the close of what was always an uncomfortable session for equities, the FTSE 100 index was left only a fraction above the day's low. It closed a net 19.2 down at 3735.0, after persistent bouts of profit taking and futures driven selling pressure.
There was much less downside pressure in the second liners, however. The FTSE Mid 250 settled only 5.8 off at 4072.4.
Overnight losses of more than a point in US Treasury bonds, and opening falls in German bonds, increased the downward pressure on UK gilts which fell by almost a half point during early trading.
Sentiment was also upset by news that M4 lending in December increased by 1 per cent over the month and by 10 per cent on an annualised basis, well above consensus forecasts of 0.4 per cent and 9.4 per cent.
The M4 figures, dealers said, unsettled the market, reducing the chances of a further cut in UK interest in the near term.
Share prices started on a dull note and paid little heed to Wall Street's overnight surge to yet another record, preferring to wait for direction of gilts and more news from the Forte bid.
But with the M4 news causing ripples of unease, the FTSE 100 posted a near 15 point decline ahead of Wall Street's opening and the Forte bid result.
The Dow Jones Industrial Average dropped over 20 points within five minutes of the opening and took London with it. At its lowest the FTSE was down 19.5, before easing off the bottom.
Forte shares topped the FTSE 100 performance table, but Whitbread suffered as its conditional deal with Forte was shredded by Granada's victory.
Dealers were quick to pinpoint the next potential bid targets, alighting on Guardian Royal, the composite insurer, long viewed as prey for an overseas insurance group. Rexam and Ladbroke were others seen as liable to attract the attention of bidders.
Oil shares took another tumble, as crude oil prices reflected the possibility of a resumption of Iraqi oil sales.
Turnover in equities was 748.9 million shares, with non FTSE 100 stocks again accounting for over 60 per cent of the day's total. Customer business on Monday's was valued at £1.72 billion, well ahead of usual levels.
