It was a rough ride for London's equity market yesterday, with all the main indices taking a pummelling as investors reacted violently to the overnight news from the US Federal Reserve.
The Fed's Open Market Committee shifted its interest rate stance from a tightening bias to an easier bias in one step, the first time it has embarked on such a move in one go.
While there were few in the market not expecting the committee to retreat from its upside bias, there was some surprise at the extent of the shift.
Some market observers claimed there had been realistic expectations of a cut in US rates, and that the slide on Wall Street overnight and again when US markets opened for business yesterday was a reflection of that.
But most observers said that the real reason markets had turned tail was the worry that the US economy was showing signs of slowing even more sharply than expected.
Much of the pain was concentrated in the telecommunications, media and technology (TMT) areas. Overnight news of a profits warning from SBC Communications was followed up yesterday by news that Merrill Lynch had downgraded Cisco, hitting the rest of the high-tech sector.
It was all too much to cope with for a London market running up to the holiday period and wary of the deterioration in sentiment in the TMT arena.
At the close, the FTSE 100 was left nursing a 118.3 point decline at 6,176.7; at its worst of the day, when the Dow was off more than 200 points, the FTSE 100 was down 156.6.
The other indices were just as badly treated and suffered too from the tech-led sell-off. The FTSE 250 closed 42.7 down at 6,437.8, having dropped to a session low of 6,424.7, while the FTSE SmallCap dipped 25.4 to 3,165.8.
