STRONG performance by gilts provided something of a prop for the equity market, helping shares regain some of their earlier hefty losses.
But the market failed in its attempt to close higher on the day as investors and traders continued to worry about the possibility of more domestic interest rate rises and about next Tuesday's budget.
There is a fear across the market that a giveaway, tax-cutting budget, although likely to improve the chances of the re-election of a Conservative government, will be badly received by the gilt market. Any marked weakness in gilts after the budget was bound to have an impact on equities, dealers said.
One feature was the continuing low levels of trading activity. Turnover at yesterday's 6 p.m. calculation came out at a lowly 746.5 million shares, in line with recent depressed levels. Traders said they expected the minimal activity to continue until the budget is out of the way.
The value of customer business on Wednesday was only £1.1 billion sterling, way below the usual range of £1.5 billion to £2 billion.
The FT-SE 100 index ended the session 9.0 off at 3,958.8, while the FT-SE Mid-250 settled 3.2 easier at 4,397.0.
There was some surprise in London's trading rooms at the British market's stubborn refusal to mirror at least some of Wall Street's recent big gains. The Dow Jones Industrial Average shot up 32 points on Wednesday, moving confidently past 6,400.
The Dow's strength was reinforced by another splendid showing by US Treasury bonds on Wednesday, when the yield on the 30-year issue fell to 6.4 per cent, its lowest level since March.
London's trading day began on a subdued note, with Footsie opening just over a point off. It then edged higher, reaching the day's best, up 3.2 within a few minutes, before slipping back. At the day's lowest ebb, after news of a minor upward revision of third-quarter gross domestic product, the index was down 15.5.
