SOME worrying US economic data on home sales promoted a bout of profit-taking on Wall Street and unnerved a British equity market anxious for more good news after the gains recorded during the previous two sessions.
Such was the worry in London about the home sales data, which hit the market just as the US Federal Reserve's Open Market Committee was meeting to discuss monetary policy, that the FTSE 100 index eventually finished with only a minuscule gain, after promising much more earlier in the session.
The Footsie ended just 0.1 ahead at 3,725.7. Second-line issues spent the session chasing the leaders, but the FTSF Mid250 index still managed to out-perform the leading index, finishing 5.6 firmer at 4,376.0.
The Mid-250's outperformance was said by dealers to have reflected a late burst of takeover speculation in some utilities stocks, notably East Midland Electricity, which raced up just before the close on talk of an imminent bid.
Specialists insisted that Southern Electric, which lost out in its attempt to take over Southern Water, was a much more likely takeover target. And there was no shortage of bid rumours in the water stocks, where Wessex and Thames Water continued to gain ground.
There was also keen takeover speculation in other areas of the market, with Yorkshire-Tyne Tees Television sharply higher amid talk that Granada was about to pounce.
The poor closing performance was in stark contrast to the bullish feeling around the market at the outset of trading. Wall Street's 75-point jump overnight, in spite of a marked reluctance by US Treasury bonds to move ahead gave London's market-makers every reason to lift their opening quotations.
The Footsie kicked off some 18 points higher but immediately ran into pockets of selling pressure that gradually eroded share prices. Talk around the City's dealing desks suggested that the market was not wholly convinced about the health of Mr Boris Yeltsin, who is campaigning for the presidency of Russia and whose potential defeat was seen as one of the more worrying international factors.
But it was the news on US home sales, which came in much higher than expected, that reminded London of the worries of an increase in US interest rates.
There was evidence that many more traders and fund managers were in the market yesterday and turnover was up sharply from recent levels. Tradepoint, the order-driven trading system, said that it had enjoyed its second-biggest turnover.
Volume at 6 p.m. was 871.8 million shares, a figure which included Argyll's buy-back of 60 million shares, or 5.2 per cent of its issued capital. The total was also enhanced by the placing by SBC Warburg of 40 million shares in Jarvis Hotels.
