A CONFIDENT opening by London's equity market gave way to a fresh bout of weakness during the afternoon as Wall Street came under heavy pressure again.
Ironically, it was Wall Street's overnight performance that injected an element of much needed confidence into London. On Tuesday evening, the Dow Jones Industrial Average had ridden out a stormy session, which saw the Dow down 60 points, before rallying strongly, sliding back again and finally rallying to finish the session 27 higher.
But a shaky opening by Wall Street yesterday, amid renewed worries that interest rates in the US may well be set on an upward path for much of this year, saw the Dow kick off in the red and continue to lose ground during London hours and afterwards. The focus of US concerns was tomorrow's non farm payroll report for March which, if as buoyant as some economists expect, might raise the spectre of a further rate rise after the next FOMC meeting on May 20th.
The Dow was trading down by more than 100 after London closed.
Market makers insisted that turnover in London remained thin and share prices would remain volatile for the rest of the week, with many fund managers taking an extended holiday and anxious to avoid making investment decisions with markets reacting so violently.
Some market makers feared that turnover would remain depressed until after the general election on May 1st; "Customer business over the past couple of weeks has been dire and is expected to remain so," said one trader.
Another senior market maker said London felt as if it had to come back further, pointing out that clients were preferring to sit on the sidelines. "But you can bet your mortgage money that they'll be in there selling the market if Wall Street takes another big hit," he warned. Observers saw 4,100 on the FTSE 100 index as the next strong support level.
The FTSE 100, which bore the brunt of the afternoon sell off, finished the session nursing an 11.5 decline at 4,236.6. The second liners and smaller capitalised issues were much less affected although dealers said any weakness in the leaders would filter through to those areas of the market very quickly.
The FTSE Mid 250 held on to a 9.9 gain at 4,507.3, but closed well below the session's best of 4,523.5. The SmallCap retained a 4.2 rise at 2,284.5, compared with a day's high of 2,286.2.
Adding to the uncertainty in the marketplace was a story that one of the leading London market makers had taken on a sizeable sell programme at the end of last week and was still holding on to the stock, despite the downturn in global markets. That story tied in with other tales that market makers have had to absorb losses during the market's extremely volatile performances since last December.
Turnover at 6 p.m. was 765.7 million shares, with non-FTSE 100 stocks accounting for a hefty 61 per cent of the total.
