The buying enthusiasm that rushed through London's equity market following last Friday's sudden, effective intervention by central banks to prop up the euro, disappeared yesterday.
Hounded by a poor showing by Wall Street overnight and again at the outset yesterday, plus another rise in crude oil prices, UK stocks retreated across a broad front as the big institutions retreated to the sidelines. Once again, it was not domestic economic or corporate news that was behind the market's stubborn refusal to take its fleeting rally a stage further. Rather it was the constant flow of worrying profit warnings from across the Atlantic that pulled the props from under the stock market.
The latest bad news came from Lexmark, the computer printer manufacturer, after Wall Street closed on Monday, and from Eastman Kodak, just before US markets opened yesterday. The signs were already ominous, with the Dow Jones Industrial Average, which ran back sharply overnight after a relatively steady performance earlier, plummeted over 170 points, while the Nasdaq, down 62 overnight, drifted away to show a 30-point decline.
London was never really in with a chance of making further progress given those performances. Always under pressure on the downside, the FTSE 100 fell back below the 6,200 level at worst, hitting 6,192.7, before gradually recovering and then dipping away again to finish a net 43.9 lower at 6,213.2.
It was the same story for the rest of the FTSE indices. Again there was precious little support for the Techmark 100, loaded with highly volatile tech stocks. It fell back to 3,714.04 before edging off the bottom to close a net 52.17 down at 3,726.91.
The FTSE 250, meanwhile, dipped below 6,700 before clawing its way off the bottom to close 41.6 lower on balance at 6,702.2. The FTSE SmallCap closed 24.6 down at 3,425.4, only 0.2 above its lowest of the day.
Marketmakers, thoroughly dismayed by the lack of support for the market as the 100 index has dropped through a series of supposed support levels, said the institutions had moved back in to support the market around the 6,200 level. "If the 100 index challenged 6,000 it would not be taken well by the market," said one trader.
While the market concentrated its thoughts on the US profit warnings and the concern they may cross the Atlantic, there was a warning of the potential for further UK interest rates from the ABN Amro economics team.
Turnover in equities was a disappointing 1.46 billion shares, a clear indication that investors had simply backed away from the market, rather than selling into the weakness.
