EUROPEAN stock markets, including London, were gripped with a real fear that Wall Street was about to embark on another three figure slide yesterday and retreated across the board.
London fell heavily for much of the session, anticipating an opening plunge by Wall Street, but began to stabilise in mid afternoon in tandem with US markets.
The FTSE 100 index, down almost 65 points at its worst in mid afternoon, when the Dow Jones Industrial Average posted a 75 point decline, eventually ended the session 39.6, or 1.1 per cent, off at 3,668.8.
After its early slide, the Dow quickly embarked on a sustained recovery which took it back to level 30 minutes after London closed and over 30 points higher shortly after that.
The FTSE 100's performance compared relatively favourably with those of other leading European markets.
The late rally in the leaders did not carry over into Britain's second liners where the FTSE Mid 250 index closed the day 549 or 1.3 per cent, off at 4,182.0.
Worries concerning Wall Street, were triggered overnight by reports that Ms Elaine Garzerelli, the Wall Street pundit, formerly with Lehman Bros but who still commands a big following with investors across the Atlantic, had predicted a big retracement in US stocks.
The reports suggested a 15 to 20 per cent retracement from their previous highs by the Dow and the Nasdaq stock measures which would take them back to around 4,600 and 1,000 respectively.
There were other worries for London, with the day's economic news, a higher than expected 1.3 per cent rise in retail sales during June, against most forecasts of just short of one percentage point, causing further unease.
The big rise was said by dealers to have lessened the possibility of another British interest rate cut in the short term. Mr Kenneth Clarke, the Chancellor of the Exchequer, is scheduled to meet Mr Eddie George, governor of the Bank of England, next week to discuss monetary policy.
Other stories unsettling the stock market included lingering worries about the forthcoming sale of Standard Life's 32 per cent stake in Bank of Scotland, which was said by some traders to be encountering investor resistance earlier in the week.
And there was speculation that the flotation of Somerfield, the former Gateway supermarkets group, had run into problems.
The weakness in equities was not, however, accompanied by any substantial selling pressure, from the institutions, who remained reluctant to unload stock: "They know it is equally difficult to pick up quality stock in a rising market," said one salesman.
Turnover at 6 p.m. reached 579 million shares. Retail business on Tuesday was a lowly £1.38 billion sterling.
