Shares made another attempt yesterday to extend the recent rally, but, once again, failed to attract any substantial support.
Dealers insisted there had been no great pressure in the market but that the absence of any substantial buy-side interest meant prices inevitably had to slip away until they found viable support levels.
"The market was dominated by a sudden flurry of programme trades, with the balance coming down on the sell-side," said a senior market maker at one big European securities house. Underlying worries about trends in Far Eastern markets were compounded by further disturbing news emanating from Tokyo where it was announced that two of Japan's leading stockbrokers, Daiwa and Nikko, had both been suspended because of their alleged involvement with "sokaiya" racketeers.
That news was enough to upset the Tokyo market, which fell 2.2 per cent. Other Asian stock exchanges managed to make good progress, notably Seoul, while the Hong Kong market closed modestly higher.
Guardian Royal Exchange delivered the best individual performance in the FTSE 100 after various broker recommendations and amid market talk that the stock is one of Cazenove's 1998 "best buys". The big buying of NatWest continued with Bear Stearns, the US stockbroker, said to have bought up to one million shares in the bank on behalf of an investment client.
Sentiment in London was undermined primarily by Wall Street, where the Dow Jones Industrial Average fell 18 points on Wednesday after the 3M profit warning. The Dow fell almost 30 points in the first five minutes after the opening yesterday. The US market was unsettled despite some reasonably reassuring economic news, which showed weekly jobless claims of 319,000, up slightly on the previous week, and a lower than expected US trade deficit for October.
The FTSE 100 index settled 22.5 off at 5,168.3. The second-line stocks, which have proved resilient during the bouts of weakness affecting the leaders, were being sold yesterday, and the FTSE Mid-250 index eventually closed 20.5 lower. The FTSE SmallCap, on the other hand, edged 1.3 higher to 2,301.8.
Earlier, the FTSE-100 had made good progress, recrossing the 5,200 level and hitting a session high of 5,219.3.
This morning brings the first expiry of the Footsie future since the introduction, on October 20th, of the new electronic order book, which facilitates instant arbitraging between the future and the underlying cash stocks.
Dealers are bracing themselves for a barrage of activity as the expiry takes place, in tandem with the expiry of FTSE 100 index options. The general feeling around trading desks is that the market may well make a decisive move after the expiries.
Speculators turned their attention back to the banking sector and sent NatWest 15p firmer to £10.75 on hopes of a merger but Barclays fell to profit-taking and found itself 23p lower at £16.77.
Abbey National resumed its bull run early on but later lost its way after it ended 2p better at £11.05, while Lloyds fell to profit-taking and was 17 1/2p weaker at 771 1/2p.
In the pharmaceuticals sector, which initially helped lift the market, Glaxo Wellcome found itself down 30p to £14.25, while Zeneca managed to hang on to its gains and strengthened 8p to £20.85.
A downgrading by stockbrokers left media group Pearson down 34p to 790p after it said yesterday that second-half revenues and profits were continuing to grow, but would be hit by sterling's strength.
Engineering group IMI gained on the back of upbeat comments by brokers and rose 12 1/2p to 408 1/2p and Guardian Royal Exchange also lifted 16 3/4p to 340 3/4p.
Turnover in equities topped the £1 billion-mark for the first time in many weeks, boosted, according to dealers by the burst of programme trade activity.
