An increasingly unhappy British stock market came under further heavy pressure yesterday with a mixture of worrying international and domestic news driving share prices sharply lower.
Already weakened by Wall Street's Wednesday slide, London was dealt another blow in mid-morning with news of the latest Confederation of British Industry (CBI) survey of distributive trades, and again at midday when the Bank of England dashed faint hopes that interest rates might be cut.
The final blow for London stocks came with a steep decline on Wall Street at the outset of trading yesterday. The Dow Jones Industrial Average quickly fell more than 200 points. Many London traders were forecasting more pain for Wall Street, and therefore for global markets, in the short term.
At the London close, the FTSE 100 index was down 174.7 at 5136.6 or 3.3 per cent on the day. And even the FTSE 250 and FTSE SmallCap indices, both of which have attracted plenty of domestic support in recent sessions, began to feel the effects of a general retreat across the broader market.
Boosted lately by the general concentration on domestic earnings and the better prospects for British interest rates, the FTSE 250 withstood much of the downside pressure affecting the leaders, even managing a minor gain in mid-session.
But that support evaporated, and the 250 index suffered a big sell-off during a testing afternoon that saw it close 59.9, or 1.2 per cent lower, at 4,751.8. The FTSE SmallCap dropped 11.4 to 2,101.4.
Market-makers were quick to point out that the gradual deterioration in the market had been accompanied by a pick-up in the amount of institutional business being put through the market.
"The big funds are now making decisions and today they are to sell into the market," said one dealer. "It's not sensational size, but enough to damage the market and to trigger general unease," he said. Turnover in equities topped the one billion mark for the first time in many weeks, eventually settling at 1.1 billion by the 6 p.m. cut-off point.
Other market observers warned that the recent rallies had been getting weaker and weaker. "That is always a sign that we're going lower," was one trader's view.
There was no doubt about the factor hurting Wall Street. There were wild rumours circulating in London all day that US President Bill Clinton was about to resign. And in purely domestic terms, the subdued Confederation of British Industry's August survey of distributive trades alarmed many dealers, although giving a boost to gilts.
The decision of the Bank of England's monetary policy committee to leave rates on hold was not well received in the stock market, even though the bank gave a broad hint that rates had peaked and could be cut in future months.
The rapidly diminishing band of market bulls insisted that the emergence of more bids would arrest the slide in the market. Indeed, a counter bid for TLG, from stake-builder Wassall, emerged at the close. Royal Sun Alliance fell 61p to 461p, Allied Zurich dropped 83 1/2p to 646 1/2 p, SGU lost 89p to 860p and GRE fell 23p to 242p.
But the prospect of more football teams being taken over by media groups sent shares in several top clubs rising today. Carlton Communications revealed it was in the early stages of talks with Arsenal about how the two companies could work together. It is not known if this could ultimately involve a takeover.
Meanwhile, Manchester United, which yesterday confirmed details of an agreed takeover bid by BSkyB, lifted 6 1/2p to 222p. Carlton, whose other interests include three ITV stations and cinema advertising, went down 2p to 423p. Granada Group, the leisure and media giant, dropped off 48p to 787p. It has been the subject of speculation that it too could be interested in a football club.
