The uncertainty affecting London's equity market was plain to see yesterday; the leaders shrugged off another bout of jitters linked to the problems affecting Asian markets, but the second-liners and small caps continued to attract bouts of hard-selling pressure.
A senior market-maker at one leading European securities house said the front-line stocks had responded to Wall Street's influences but the rest of the market continued to reflect fears of the further appreciation of sterling and worries about the potential for further increases in British interest rates.
"The leaders have been hit very hard recently and there was clearly scope for a bounce, more so because of the Dow's rally today; but it is a bit early to chase the market," the dealer said.
He also pointed out that there remained plenty of counter-attractions for dealers starved of genuine investment activity; the latest World Cup soccer games remained the focus of attention across the City and there was the added distraction of the Wimbledon tennis tournament.
London's stock market has been badly damaged in the past couple of weeks by the surprise increase in UK interest rates and a sequence of worrying economic news items, including higher-than-forecast retail sales, inflation rates and earnings data, all of which might provide ammunition for the Bank of England's monetary policy committee to increase rates again.
The FTSE 100 index finished the session on a buoyant note, posting a closing gain of 59.6 at 5,772.0, after swinging in a 73point arc during an uncertain session.
In sharp contrast, the second-liners and small caps had to endure another extremely painful session.
Much of the market's genuine activity was concentrated in this area. At the 6 p.m. cut-off point, turnover in British shares reached 910 million shares, with the majority - 490 million shares - transacted in non-Footsie issues.
The second-liners were badly affected by some damaging news from the retail arena where Sears detailed a rather disappointing showing by its soon-to-be-demerged Selfridge department store and Carpetright upset the market with a downbeat trading statement describing a 5 per cent decline in sales during the first six weeks of its financial year.
There was more disappointment for FTSE 250 watchers from First Leisure, whose results and trading statement saw its shares retreat nearly 10 per cent.
Burdened by those weaknesses, the FTSE 250 posted its 10th straight decline, eventually finishing the day 51.6 lower at 5,510.4. The decline is now more than 450 points. Some dealers forecast continuing pain for the index if sterling extends its recent burst of strength.
The FTSE SmallCap, meanwhile, dropped a further 36.6 to 2,624,8.
Technical analysts remain wary of the market's performance. Richard Lake, chartist at Brewin Dolphin Bell Lawrie, the stockbroker, said Footsie "will test its rising 200-day moving average, currently around the 5,500 level, and then continue down to the 5,250 area short-term".
