A BATCH of mildly unsettling economic news, the return of US interest rate jitters and increasing uneasiness over some important data due today from both sides of the Atlantic brought an end to five straight gains in London's equity market.
The FT-SE 100 index was never able to push into positive ground throughout a disappointingly slow session and eventually settled a net 10.5 off at 3,905.6.
There was no escape, either, for the second line stocks, which suffered on the same scale as the leaders. The Mid-250 lost 20.1 to 4,418.3. The market's minnows fared better, however, with the Small Cap index managing a 3.3 point gain at 2,177.3.
Dealers described the market performance yesterday as disappointing, but predictable, given its recent strong run which has seen Footsie move up over 60 points in a straight line.
But it was especially disappointing in view of a number of powerful displays by some of the market's most important areas, notably the oils and banks. And surprise news of a £613 million sterling worth of special dividends from Reuter also provided the market with a midday burst of good news which ignited the company's shares and instantly put three points on a then flagging Footsie.
London began the session on a quietly subdued note, mindful of news late on Tuesday that a governor of the US Federal Reserve had stated that US inflation was entering a "danger zone".
The news rekindled the market's worries that the next meeting of the Federal Reserve's Open Market Committee could well bring a rise in US interest rates a move given widespread publicity in the press last week, when there was speculation that the Fed would sanction a rise of as much as 50 basis points.
British economic news yesterday, including a slightly bigger than expected decline in unemployment, and higher than forecast unit wage costs, caused momentary unease in gilts and equities.
Footsie briefly dipped below the 3,900 level, less than an hour before Wall Street came in, but later managed to recoup some of those losses, thanks mostly to a late surge in oil shares.
These raced up after news of a potential escalation of the conflict in Iraq, after reports that the Iraqis had launched missile attacks on US aircraft.
Oil specialists said such a move would further reduce the chances of a return of Iraqi oil to world crude oil markets. This would trigger increased tightness in oil markets and therefore put upside pressure on prices. Shell was additionally lifted by talk that one of the leading broking houses was forecasting a 20 per cent increase in the interim dividend, expected today.
Turnover at 6 p.m. totalled 651.4 million shares. Customer business on Tuesday was valued at £2.01 billion, the highest for some weeks.
