A sell-off in the heavily-weighted telecoms stocks and a stodgy overnight showing by Wall Street brought an end to the three-day upsurge in London's equity market.
But while the decline in stocks was mostly market-wide, the level of selling pressure in the market was never substantial, with dealers claiming the underlying mood in London remained reasonably secure and was helped by a welcome uptick on US markets.
Shortly after London closed the Dow Jones Industrial Average was up 30 points and the Nasdaq more than 50 to the good. At the end of the day the FTSE 100 was 13.8 off at 6,518.2. The FTSE 250 was 19.8 down at 6,879.6 and the Techmark 100 11.77 lower at 3,591.24. The SmallCap finished 1.3 firmer at 3,435.6.
The debate over UK interest rates continued to fuel considerable comment among market participants. Wednesday's news that the Bank of England's monetary policy committee was split five to four in favour of leaving rates on hold was seen by some as increasing the chances of a rise in UK interest rates after the mpc's next meeting, scheduled for September 6th and 7th.
On the other hand, the lower than expected increase in average earnings in June was viewed by others as a powerful argument for a more neutral policy stance.
And there was more encouraging economic news yesterday with retail sales in July coming in unchanged and the previous month's rise revised downwards too, from 0.7 per cent to 0.5 per cent, lessening the pressure for higher rates.
The weakness in telecoms was triggered by two factors. BT announced the purchase of a further 45 per cent stake in Viag Interkom, its German joint venture, from Eon, the German energy group. BT shares fell sharply initially, before rallying late in the session, with analysts citing the increase in BT's debt burden as likely to trigger earnings downgrades.
The second factor hitting telecoms was the latest round of bidding for third-generation mobile phone licences in Germany.
Bidding built towards a climax yesterday and prompted substantial weakness in Vodafone shares, by far the heaviest weighted in the FTSE 100.
Countering the weakness in telecoms, however, was another strong showing by the oil majors.
Turnover in equities picked up again, hitting 1.47 billion shares by 6 pm.
