ALL THE leading FT SE indices charged to all time intra day peaks yesterday but the leaders failed to hold on to their initial gains and fell back to close with modest losses overall.
The weakness in the FT SE 100 stocks came after a flurry of options related activity associated with the expiry of the January options in mid morning.
The market also became increasingly edgy about the possibility of an interest rate rise in Britain following the regular monthly meeting between Mr Kenneth Clarke, the Chancellor of the Exchequer, and Mr Eddie George, governor of the Bank of England. They met yesterday afternoon and the market was left hanging fire until any hard news on rates news emerges.
The day's economic news showed a bigger than expected fall in unemployment in Britain during December. The 45,100 decline, against a consensus figure of 30,000, was said to have slightly added to the chances of a rate increase.
Figures for underlying average earnings in November and unit wage costs for the three months to November were in line with expectations.
Footsie finished the session looking vulnerable and closed a net 9.3 off at 4,158.9, having got to within 8.5 of the 4,200 level shortly after trading started.
The second liners and smaller capitalised stocks managed to hold on to most of their earlier gains, however. The FT SE 250, which has lagged behind the 100 index, hit a record intra day high of 4,570.2, before settling a net 2.8 better at 4,560.0, 8.3 below its previous closing peak. The SmallCap closed 9.4 higher at an intra day and closing peak of 2,267.2.
Earlier, all sectors of the market embarked on a powerful run which propelled all the top indices to new peaks. The impetus for the surge came from Wall Street where the Dow Jones Industrial Average ended Tuesday 53 points higher at a closing record of 6,762.29.
London stocks were additionally lifted by the continuing speculation of renewed takeover activity in the market.
After the first flush of enthusiasm, the leaders quickly began to run out of steam, with pockets of profit taking. And Wall Street's weak opening did nothing to boost flagging confidence.
Dealers said London had reflected the increasing worries about a potential rate rise. There was further switching out of the leaders, many of which are sensitive to sterling's strength, into the 250 and SmallCap stocks which are much less vulnerable to overseas markets.
Traders also said that Merrill Lynch was forecasting a substantial correction on Wall Street in the short to medium term.
The banking area remained at the forefront, with Standard Chartered topping the Footsie performance table after being recommended by SBC Warburg. HSBC also raced higher, but there was a feeling that the domestic banks were running out of steam.
Turnover at 6 p.m. was 882.3 million shares. Customer business on Tuesday was valued at £1.32 billion sterling.
