If investors pulled the plug on the London stock market yesterday, they also left the taps running. Any cash that poured out because of disappointing figures and inflationary data gushed back as the very worst fears that have haunted the market over the past few days receded.

"The story of London was the story of the US long bond," said Richard Jeffrey, strategist at Charterhouse. "Its fall has unnerved financial markets worldwide and when it recovered in the afternoon, London stabilised."

By the close, Footsie was off 31.4 at 6,175.1.

The day began with the fall-out from the slide in long-dated US government bonds that had taken prices down and pushed the debt yield back up to 5.6 per cent, a level not seen since last August.

Nervousness that inflation might be waiting in the wings had been exacerbated by the latest comments from Alan Greenspan, the chairman of the US Federal Reserve.

On a corporate level, a big earnings downgrade in Compaq, the world's largest personal computer maker, weighed on US technology stocks. And disappointing figures from Dresdner Bank overshadowed that sector, which has had a strong results season in Britain. Finally there was little hope for next week's monetary policy committee meeting. The Bank of England has cut rates every month since October and is widely expected to hold base rates at 5.5 per cent.

Against all this was the long bond. Helped by a slightly weaker inflationary element in the GDP data, it rebounded and gave some breathing space to the more benign British outlook.

Turnover eased to 1 billion shares with just over 50 per cent represented by Footsie stocks.