The UK equity market seemed to pause for breath yesterday. The FTSE 100 index closed down 6.6 at 6,385.4, having traded in a narrow 50-point range. There was plenty to distract equity investors. Those Britons who were not coping with floods were seemingly queueing at the petrol station. And the European Central Bank was making another attempt to support the euro.
At least there was a bid story to keep traders amused. News that Abbey National had approached Bank of Scotland was seen as putting both banks in play. Normally, a FTSE 100 bid story would be expected to push the market sharply ahead. But there was still a bit of nervousness around. Oil and gas shares lost ground for the second day in succession after disappointment with Shell's third-quarter results.
After Vodafone's precipitate fall on Thursday, there were hopes that the UK's biggest stock would rebound yesterday. But with some brokers marking down their EBITDA (earnings before interest, tax, depreciation and amortisation) forecasts, the stock was unchanged on the day. A profits warning from Sprint of the US did not help sentiment towards the telecoms.
Investors still expect both the Federal Reserve and the Bank of England to leave interest rates on hold this month. The Bank's monetary policy committee (MPC) meets next week, when investors will also have the Presidential elections and pre-budget statement to consider.
For the second successive day while the blue chip benchmark lost ground the other indices moved ahead. The FTSE 250 advanced 36.5 to 6,749.2, the SmallCap 10.2 to 3,334.6 and the techMARK 100 rose 55.47 to 3,499.38.
Turnover was again fairly heavy with 1.86 billion shares traded by the 6 p.m. count, although around a quarter of this was due to Vodafone.
In his latest UK equity note, Bob Semple of Deutsche Bank said: "The UK market has proved well supported at the 6,000 level. Unfortunately, the upside remains limited. First, the UK economic data are ambiguous, but the evidence of a slowdown is mounting.
"Although this may prompt the MPC to keep rates on hold, there is a hawkish core which makes any early easing of rates unlikely. Second, the TMT [technology, media, telecommunications] sectors that might provide market leadership still look expensive and have proved vulnerable to disappointing news."
"In light of our view that FTSE will not break free of the (current trading) range until next year, we have shaved out end-2000 target to 6,800. Our FTSE 100 target for end-2001 is 7,500."
