ANOTHER London tube strike and the absence of any significant economic news led to a quiet session in the British equity market yesterday.
Investors seemed to be sitting tight ahead of today's meeting be- tween Mr Kenneth Clarke, the Chancellor of the Exchequer, and Mr Eddie George, the governor of the Bank of England. The odds were thought to be against a further rate cut but the chancellor has surprised the markets before.
Yesterday's consumer credit figures were weaker than expected but were thought unlikely to provide the chancellor with a convincing argument for a rate reduction. Plenty of other indicators, such as last week's retail sales numbers, have pointed to the robust health of the consumer sector.
Shares received a modest lift from Friday's strength on Wall Street, where the Dow Jones Industrial Average finished around 50 points ahead. The FTSE 100 index started the day in positive territory and at its best, after an hour's trading, was 11.1 points up at 3,684.4.
A modest initial setback on Wall Street, where the Dow was 12 points lower by close of London trading, took the edge off Footsie's performance in the afternoon. Traders remain nervousness about the US market, especially as economic data to be published later this week might prompt a US interest rate rise in August.
Footsie ended the day 5.5 points ahead at 3,678.8 while the FTSE Mid 250 index gained 10.1 to 4,226.1.
With Monday traditionally the quietest day of the trading week and many dealers and investors on their summer holidays, volume was light. By the 6 p.m. count, only 453.0 million shares had been traded. Futures volume was also remarkably low. However, the value of customer related business on Friday was a surprisingly robust £2.2 billion sterling, with the help of some late recorded trades.
The main item of corporate news was the confirmation of talks between Bass and Allied Domecq about the latter's stake in Carlsberg Tetley. Any deal is likely to face considerable monopoly hurdles.
Speculation also returned to the utilities sector, with East Midlands Electricity once again seen as a target for a US bidder.
The turbulence in the equity market over the past few weeks has still failed to move the FTSE 100 index decisively out of the 3,650-3,850 range, in which it has been trading for much of 1996. However, institutional investors have recently seemed unenthusiastic about the market and the dividend yield on the All Share has crept back towards 4 per cent.
Mr Richard Kersley, British strategist at Barclays de Zoete Wedd, said that "rumbling in the background, there has been a shift from equities towards bonds".
