EXTREME volatility in Treasury bonds and stocks on Wall Street, both overnight and at the start of trading in the US market, continued to unnerve the British market, which fell sharply before closing well above the day's lows.
Wall Street's latest bout of erratic behaviour came in the wake a low Chicago Purchasing Managers' index which came in at 44.9, against a consensus estimate of above 50.
The news saw US Treasury bonds, which gave a disappointing performance overnight amid conflicting economic data, recover from early losses of around a full point, before easing again. Markets also reacted with disappointment as German interest rates were left unchanged after the Bundesbank meeting.
The Dow Jones Industrial Average, which triggered its circuit-breakers for the sixth consecutive session overnight, initially fell away yesterday, rallied strongly and then resumed its downward trend after London closed.
The FTSE 100 index was left nursing a 10.6 decline at 3727.6, while the second-line index, the FTSE Mid-250, ended the day only 0.5 off at 4215.0.
Once again, it was the hint of prospective takeover bids just around the corner that helped the mid capitalisation stocks. Trafalgar House shares climbed another 3 per cent after reports that Kvaerner of Norway would probably launch a bid for the troubled conglomerate next week. There were also suggestions that the long-awaited bid for one of the few remaining regional electricity stocks was imminent.
