For a few moments at the start of trading, it looked to the casual observer as if the UK market was in for another Black Monday. By 8.15 a.m., the FTSE 100 index had dropped 208 points. But the fall was short-lived, springing as it did from a "sell" programme trade, apparently executed by Deutsche Bank.
Dealers said the trade was accidentally initiated at "best" prices instead of the usual "mid" prices and caused maximum damage at a time when the most commercial institutional bid and offer prices are not yet in the Sets system. What was even more surprising was the small size of the programme, believed to have been worth around £15 million. "After a few seconds of semi-panic it was back to normal," said one trader.
The UK equity market would have been weak in any case, given the early markdowns in three of the largest stocks. Vodafone was hit by the announcement of a bond issue from Hutchison Whampoa, convertible into the telecom group's shares, while Glaxo and SmithKline Beecham shares dropped on news that their merger would be postponed by US regulators.
Vodafone continued to be a drag on the market throughout the day, dropping 4.5 per cent by the close. But the pharmaceutical stocks recovered from their lows and the equity market was given a strong boost late in the afternoon by a surge in the oil giants, BP Amoco and Shell.
The oil sector took its cue from a rebound in the price of crude, which came despite the weekend's announcement of a production increase by the Organisation of Petroleum Exporting Countries.
Industry experts cast doubt on how much "new" oil the agreement would actually bring into the market, given that production quotas were already being exceeded.
Indeed, equity markets took a back seat yesterday to action in other financial assets. As well as the frantic trading in oil, the currency markets were also active, with the euro hitting another all-time low and the pound sinking to a seven-year nadir against the US dollar.
The day's domestic economic news was mixed. While input prices rose more slowly than expected, Incomes Data Services reported that pay settlements were edging higher.
It all added up to a "grey" rather than a black Monday. The FTSE 100 index ended the session a long way off its lows, down 18.7 at 6,582.0. However, that did put the blue-chip benchmark back in the 6,000-6,600 trading range which it appeared to have escaped last week.
