Perhaps it is time for the warning on investment products to be rewritten. "Shares," it should say, "can go up as well as down." The FTSE 100 index fell for the 12th time in the last 13 trading sessions yesterday and there appeared to be no end in sight to the fall. Indeed, matters could have been a lot worse. Whereas the FTSE 100 index closed 80.7 down at 6,199.2, in mid-morning the blue-chip benchmark was 129.4 lower at 6,150.5.
It was only three weeks ago that the market returned from the August bank holiday in confident mood, with many traders and analysts talking about a surge into record territory. Instead, the market has plunged back towards the bottom of its long-running trading range.
Few indices fall so far or so fast without some sort of rally being attempted. And some analysts think the bottom of the recent trading range will provide some support.
"6,000-6,800 has been a pretty good range for the market and it is difficult to believe that we will see a sustained break below the bottom of the range," said David McBain, UK equity strategist at Deutsche Bank.
The catalyst for yesterday's fall came from the telecoms sector, after Wednesday's profits warning from the US group Sprint. Vodafone and British Telecom, two of the biggest stocks in the market, fell from the start of trading and stayed in negative territory all day.
There was potential good news, however, in the call from Al Gore, the Democratic presidential candidate, for the US to release part of its strategic oil reserve. The oil price fell on the assumption that President Clinton would grant his deputy's request. But that was not enough to rescue sentiment. Wall Street did little to help. Although the Dow Jones Industrial Average recovered slightly from Wednesday's 100-point drop, the Nasdaq headed lower in early trading.
All the main indices lost ground. The FTSE 250 index fell 80 to 6,703.3 and the SmallCap 29.7 to 3,471.4. The Techmark 100 index of technology stocks was hit particularly badly; it fell 72.97 to 3,697.26 and is now almost 36 per cent below its March 6th peak.
Oil could be the key to a turnaround, given that the high price is hitting corporate profits and the prospect for economic growth.
"The market is hovering between the belief in a soft economic landing and a hard landing," said Richard Crehan, UK strategist at Morgan Stanley Dean Witter. "If the oil price drops below $30, there will be a relief rally on the hopes of a soft landing. But if it stays above $35, the markets will be nervous."
Turnover was a robust 2.2 billion by the 6 p.m. count, with heavy dealing in Vodafone and Invensys, which declined further.
