LONDON stocks were hit by a massive hangover in the first trading of the new year, caused by the sell-off in US Treasury bonds and stocks on New Year's Eve and again yesterday when US markets fell sharply after worrying economic data.
Tuesday's US trading session saw bonds retreat well over a point and the Dow Jones fell 101 points after worryingly high new home sales increased the chance of a US rates rise when the Federal Reserve's Open Market Committee meets in early February.
The Dow's fall, its biggest since July 15th, prompted London's marketmakers to chop their opening prices and head off large sellers.
And there was further trouble from the US yesterday when the Dow Jones Industrial Average posted an 85-point slide shortly after the opening of trade. Wall Street's painful performance yesterday came in the wake of more worrying economic news.
The US news included higher than expected weekly jobless figures which momentarily boosted treasury bonds. But the market reacted violently on the downside to the National Association of Purchasing Management index. At the close of a trading day which featured the low volumes seen during the recent Christmas and new year trading sessions, the FTSE 100 posted a 61.1 decline at 4,057.4.
Second-line stocks and the market's smaller capitalised issues were hit by the overall deterioration in sentiment in the market but dealers' activity in both areas was minimal.
The Mid-250 index dipped 21.0 to 4,469.4.
