The FTSE 100 index shed some of Wednesday's gains yesterday as the blue-chip benchmark once again proved reluctant to break out of its long-running 6,000-6,600 trading range.
The setback came in spite of figures that appeared to confirm signs of a slowdown in the British economy. UK retail sales rose by 0.4 per cent in May, below the market consensus and taking the latest three months on three months gain to just 0.2 per cent.
And the pain being suffered on the high street was highlighted by the decision of privately-owned C&A to close all British and Irish stores.
According to Mr Philip Shaw, UK economist at Investec, the retail sales data "may be highly significant in terms of signalling wider trends in the economy, as retail sales account for some 20-25 per cent of final domestic demand. It is looking increasingly likely that the UK has reached the top of the interest rate cycle and, even if this is not the case, we are extremely close".
However, the UK market was uninspired all day, with Footsie moving within a narrow 75-point range. A slower British economy may limit the scope for interest rates to rise but it will also restrict corporate earnings growth. Mr Steve Russell, UK strategist at HSBC, said: "There is clearly a growing view that sterling is on a weakening trend and that UK interest rates are going to peak. But we feel that global growth is going to slow very rapidly and we wouldn't be chasing industrial stocks."
US industrial production figures were stronger than expected and this had a restraining influence on Wall Street, which has recently moved to the view that the Federal Reserve Open Market Committee will not raise rates when it next meets on June 27th/28th.
By the London close, the Dow Jones was up about 15 points and the Nasdaq Composite down by about the same amount.
All this left Footsie down 45.5 at 6,490.8 by the close, its low for the day, compared with a session best of 6,566.2.
It was a bad day for technology stocks in particular, with Freeserve and its parent Dixons suffering as German Internet services provider TOnline appeared to rule out a bid for the UK group.
The Techmark 100 index fell 45.47 to 3,327.47 and remains 42 per cent below its March 6th high. The FTSE 250 and SmallCap indices both advanced. The former gained 13.7 to 6,503.1 and the latter 7.4 to 3,326.0.
Old economy stocks generally had the best of the day with AB Foods the best performer and BAE Systems and Corus also doing well.
BSkyB, the satellite television group, responded well to its success in clinching Premier League football rights for a further three seasons.
