The London stock market's recent rally petered out yesterday in response to opening weakness on Wall Street. Once again, it was the trend in the US, rather than any domestic considerations, that seemed to determine the market mood.

Tuesday's strong finish by the Dow Jones Industrial Average and the Nasdaq Composite helped the FTSE 100 gain 59.2 to 6,342.2, its best level of the day, in the first few minutes of trading.

But when that rally was not sustained in New York yesterday, Footsie fell back. The Dow was around 110 points lower and the Nasdaq a few points higher when trading in London closed.

The result was that the FTSE 100 closed 26.5 off at 6,256.5, erasing more than half of Tuesday's gains.

There were better performances from the other indices, however. The FTSE 250 gained 58.6 to 6,189.1 and the SmallCap 29.1 to 3,157.2. Strongest of all was the volatile Techmark 100 index, which reaped the benefit of Tuesday's Nasdaq rally; it gained 104.2 to 3,627.56. That still left the index of leading technology stocks 37 per cent below its March 6th peak.

Leading the tech stock rally yesterday was Psion on the back of Sony's agreement to license the Symbian software platform for mobile phones. Psion is one of the leading shareholders in Symbian.

But there was an offsetting effect on some of the old economy stocks with pharmaceutical giants Glaxo Wellcome and SmithKline Beecham shedding some of their recent gains.

The strength of the pound continued to be a worry for some sectors with the Bank of England's trade-weighted index reaching another 15-year high of 111.9.

The latest Confederation of British Industry survey found manufacturing confidence fell in April, the first drop in a year, in the face of higher interest rates, falling orders and the strong pound. Most analysts still expect a further rate rise from the Bank of England in May. The second-quarter strategy document from Credit Suisse First Boston says: "The robust sector trends that propelled the FTSE 100 through the winter months have begun to crack as market sentiment and confidence in the economic outlook have weakened. The great wave of liquidity that lifted TMT stocks to new highs in March has peaked, leaving shares precariously positioned at extreme valuation levels.

"A tactical retreat seems the right call here, until equity prices and supply have adjusted to set a new liquidity equilibrium."

Turnover was 1.86 billion shares by the 6 p.m. count. Vodafone AirTouch, Stagecoach and BP Amoco all traded more than 100 million shares.