FOR the third day in a row the London market struggled to find direction as interest rate hopes vied with political and profit uncertainties. Economic data earlier in the week, together with the quarterly inflation report of the Bank of England, had encouraged hopes that the next move in UK interest rates might be down, perhaps as early as February.
But any optimism investors might have felt about the UK outlook was offset by a sharp fall on Nasdaq on Thursday, as Merrill Lynch downgraded semiconductor companies.
The London market got a lift in mid-afternoon from Wall Street as the latest legal moves in Florida appeared to indicate that a decision in the US presidential election might finally be imminent.
But the gains on Wall Street petered out in the face of Argentinian debt worries and a BellSouth profits warning. The FTSE 100 ended 9.7 points ahead at 6,440.1, with the help of strength in the pharmaceutical sector. There was a mixed performance from the other main indices. The FTSE 250 dropped 4.2 to 6,713.6 and the Techmark 100 edged down 0.93 to 3,146.62. But the SmallCap inched up 0.2 to 3,321.3.
Over the week, the FTSE 100 was up 0.6 per cent, the 250 down 0.3 per cent, the SmallCap fell 0.5 per cent and the Techmark 100 dropped 2.4 per cent.
Turnover was 1.39 billion shares by the 6 p.m. count, well down on the previous three sessions.
Corporate news was fairly sparse although chemicals group, British Vita, and engineer, Automotive Precision, saw their shares suffer as they became the latest UK groups to unveil profits warnings. Railtrack lost ground after the resignation of its chief executive, Mr Gerard Corbett. Freeserve rebounded for the second consecutive session.
The same pointers that are encouraging hopes of lower interest rates are taking their toll on profit forecasts. Dresdner Kleinwort Benson says that earnings downgrades outnumbered upgrades in October with forecasts dropping by 0.6 of a percentage point over year one and 0.2 of a point over year two.
Telecoms, steel and electronic stocks saw the biggest downward revisions. But analysts remain generally confident that the London market has reasonable upside from its current level.
Mr Tony Jackson, of Charterhouse Securities, is forecasting that the FTSE 100 will end 2001 at 7,250. "By the end of next year, it should be clear to the market that interest rates are heading downwards. As for gilt yields, our working assumption is that they will be at their current level. It follows that much of the upside for the market must come from earnings growth."
