An uneasy calm descended on London's equity market yesterday, with the 3.3 per cent rally in share prices over the previous two sessions, induced by a good rally across Far Eastern markets, giving way to a much more cautious attitude. Always on the back foot, the FTSE 100 index finished a relatively quiet session down 21.6 at 4,845.4, well above the day's low, but never threatening to regain its recent upward momentum.
The market's other indices were similarly weak, with the downside emphasis again on the smaller issues. The FTSE SmallCap index, which has been left behind somewhat in recent days, lost 8.1 to 2,280.0.
The FTSE 250 index dipped only 2.4 to 4,623.4, sustained, according to dealers, by a raft of positive trading results from many of its constituents, notably Great Portland, the property group, De la Rue, the paper and printing company and Perpetual, the fund management group.
A double digit dividend increase and a proposed buy-back of 10 per cent of its own shares propelled Northern Ireland Electricity shares, another of the big winners in the Mid-250 index.
Of the Footsie constituents reporting yesterday, BOC and Vodafone were in line with expectations, but the latter took a hit from the introduction of a more aggressive stance on mobile phone tariffs.
The front-line index was also burdened by a steep fall in Enter- prise Oil after a disappointing update from the company.
Economic news from both sides of the Atlantic was seen by strategists as market-positive.
On the domestic front, the public sector borrowing repayment for last month came in at an encouraging £5.7 billion sterling, while in the US the October inflation monthly rise of 0.2 per cent was well received.
Wall Street kicked off on a firm note, with the Dow Jones Industrial Average posting a 20-pointsplus gain within five minutes of the opening bell. It maintained its position until London closed for the day, when the Dow slipped into negative territory.
London was locked in a relatively narrow trading range all day, retreating to a low of 4,827.0 in mid-morning before stabilising later in the session, despite the uneven trend in the US.
Turnover was a light 671.4 million shares, spread evenly between Footsie and other stocks.
Traders said London was drifting in the run-up to Christmas, which could well see a general market consolidation and might prompt the big institutions to drive up prices of the poorer performers, such as Halifax and the Woolwich.
Goldman Sachs, the investment bank, reduced its 12-month Footsie forecast from 5,500 to 5,250, although it expected British equities to outperform Europe.
It cited five reasons for its stance: attractive relative valuations; its view that strong economic growth and high interest rates are not necessarily negative for equities; the prospect of EMU entry; possible currency depreciation; and Britain's defensive qualities.
