A FRESH bout of interest rate jitters, mostly in the US but also in Britain, resulted in stocks markets on both sides of the Atlantic suffering hefty initial losses, but both recovered strongly during British market hours.
British equities were initially affected by the aftermath of last week's by election in Wirral South in which there was a 17 per cent plus swing to Labour, a move which would see a Labour government with a comfortable majority in a general election.
But two big share buy backs in utilities, plus another burst of takeover speculation in the composite insurance sector and else where, helped the London market regain its composure after a rather difficult start.
At the close of a busy session, the FTSE 100 was left only 1.2 lower at 4307.1, comfortably clear of the 4300 level which lit lost throughout the morning and early afternoon.
The second line stocks fared much better than the leaders, however. The FTSE 250 was never really under pressure and settled 0.1 firmer at 4654.5, while the FTSE SmallCap index spent most of the day in positive territory before sliding late in the session and closing a net 2.5 down at 2351.4.
The SmallCap was handicapped by a handful of exceptionally weak performers such as JKX Oil & Gas, Tunstall and PPL Therapeutics which fell between 16 and 34 per cent.
Share prices were under pressure from the outset, with market makers chopping their opening levels after the weak closing performance of Wall Street last Friday when the Dow Jones Industrial Average finished the day 47 points lower.
A long list of economic news did little or no damage to sentiment in the market. The UK Purchasing Managers index for February, at 53.5, was below forecasts, but still showed growth in the economy, while the money supply statistics were also below estimates.
Economic news from the US showed the NAPM higher than expected and that triggered a poor opening to Wall Street where the Dow fell more than 40 points before staging a strong recovery.
Some market observers are growing increasingly uneasy about the possibility of the US Federal Reserve increasing interest rates on March 25th, when its monetary policy committee next meets.
Few expect Mr Kenneth Clarke, the Chancellor of the Exchequer, to increase British rates after his regular monthly meeting with Mr Eddie George, governor of the Bank of England, tomorrow.
Banking stocks, which have spearheaded the market's drive to new highs recently, moved in the opposite direction yesterday, with NatWest tumbling on the revelation of big losses in its interest rate derivatives activities.
Turnover at 6 p.m. was 1.468.3 million shares, boosted by the Southern Electricity and Yorkshire Water buy backs.
Customer business on Friday was valued at £3.1 billion.
