CONFIRMATION that Britain will go to the polls on May 1st came as no real surprise to the City, but still managed to cause ripples of uncertainty across British equities.
The election news by itself caused no sizeable problems for share prices, but the element of political uncertainty brought considerable pressure to bear on the currency, which, in turn, began to cause problems for gilts.
Sterling fell by 3.7 pfennigs against the deutschmark and by more than a cent against the dollar yesterday, with the trade weighted index down by around 1 per cent.
Dealers said the gilt market's solid showing on the back of a strong British currency since last autumn was being undermined by political concerns. Gilts were down around a full point over the session, burdened, later in the day, by a tired opening by US Treasury bonds.
Market makers said a weak start by US shares pulled the rug from under the British market. The Dow Jones Industrial Average was down by 70 points an hour after London closed, depressed by comments by Mr Robert Parry, president of the Federal Reserve Bank of San Francisco, who warned of the risk of accelerating inflation in the US.
Wall Street sentiment continues to be plagued by concerns about the course of US interest rates. Many observers expect the Federal Reserve to nudge interest rates higher in the near future, possibly as soon as the next meeting of the Fed's Open Market Committee, scheduled for March 25th.
At the close of a difficult trading session, the FTSE 100 was left nursing a 51.0 decline at 4,373.3, although that fall was exaggerated by no less than 12 FTSE 100 constituents being quoted ex dividend, accounting for 22 points.
The market's secondliners and smaller capitalised stocks resisted the weakness affecting the leaders for much of the day, but the former ultimately succumbed to the overall trend, with the FTSE 250, index settling 15.8 down at 4,692.0. The FTSE SmallCap gave another display of its resilience. It, resisted the pressures from the wider market until 10 minutes before the close when it slipped into the red. But then it stabilised and finished the day unchanged at 2,365.2.
The head of sales trading at one big London securities house said London's political worries were being worsened by Wall Street: "The problem for the market is that a long, bitterly fought campaign will see the Conservatives rally and maybe get back to leave Labour with only a narrow majority or worst of all, a hung parliament.
