The stock market suffered its biggest one-day fall for three weeks as investors decided to take profits after the long bull run. The FTSE 100 index dropped 55.4 points to 5,552.5, around 14 points ahead of its worst levels of the day.
There were signs that the worldwide rally, which started in mid-January, was finally running out of steam. Asian markets were generally weaker, with a very sharp fall in Jakarta while, in Europe, early strength, which saw the DAX top 4,600 for the first time, quickly dissipated.
On Wall Street, the Dow Jones Industrial Average dropped 40 points in its first half-hour of trading and was around 70 points adrift when London closed.
The FTSE 100 index managed a modest gain in early trading but by mid-morning shares were heading sharply lower, as a wave of programme trades buffeted the market. Banking stocks, which have been in the vanguard of the rally, seemed to be a particular target for the sellers.
As it became clear that Wall Street would open weaker, the index fell to the day's low-point of 5,538.6, down 69.3. It drifted in the mid-5,500s for much of the afternoon.
The weakness was largely confined to the blue-chip stocks, however. The FTSE Mid-250 index held up well under the pressure, helped by a rebound in two stocks that were battered earlier in the week - JBA and Biocompatibles. At the close, the index was just 7.6 points off at 4,983.9. And the SmallCap actually edged up 1.2 to 2,425.1, another record high. Investors seeking to take profits out of the market usually sell the most liquid stocks first.
The latest set of corporate results turned out to be something of a mixed bag. BT's figures were above most forecasts and the shares responded accordingly. Willis Corroon, the insurance broker, also pleased the market and Cadbury Schweppes gave a reassuring report on its US drinks business.
But shares in Shell were knocked by disappointing figures and a warning that the Asian crisis and oil price weakness would have a continuing negative impact. And there was a profits warning from Celsis International, the health care group.
Shadows hanging over the stock market include the effect on corporate earnings of the Asian crisis, the strength of sterling and a possible domestic economic slowdown later in the year. According to IBES, the financial information group, British corporate earnings are currently expected to grow by 11 per cent in 1998.
Elsewhere, it was jobs gloom for 870 staff at construction giant BICC and smaller rival Delta after they announced two multi-million pound deals.
Employees will be affected as BICC sells some of its wire-making businesses to Delta in return for buying cable-making and wire operations from Delta.
The City, warming to the job losses, lifted Delta 18p to 265p and BICC 1/2 p to 140p.
The shock departure of Chelsea player manager Ruud Gullit, saw Chelsea Village, the company which owns the Premier Division club, lose 7p to 91 1/2p.
There was little change for other teams in the sector with Manchester United, Tottenham Hotspur and Sunderland all unchanged at 157p, 68 1/2 p and 407 1/2p respectively.
Buns-to-guns group Tomkins announced it was paying £92 million for part of Kerry Group's newly acquired Spillers milling business, beating a bid from Associated British Foods.
Tomkins fell 6p to 327p and Associated British Foods eased 12p lower to 615p.
Cable & Wireless eased 19p to 623p but Colt Telecom, which doubled its turnover but nearly tripled pre-tax losses on the back of startup costs, improved 25p to £10.55.
Volume was 807.4 million shares by the 6 p.m. count, of which 54 per cent was in non-Footsie stocks.
