The Chancellor did nothing to frighten the horses in his budget yesterday, allowing the FTSE 100 index to end the session with only a small loss. But it may well have been a rebound on Wall Street, rather than the detail of the budget, that prompted the late rally.
With the Dow Jones Industrial Average up more than 100 points by the London close, Footsie recovered from a loss of 81.1 to close 6.6 off at 6,617.9. There was a lot more action going on at the stock and sector level with another big split between the old economy and new economy stocks.
A 3.9 per cent fall in the technology-heavy Nasdaq index on Monday, followed by another decline in early trading yesterday, triggered another sell-off in London's high-tech stocks.
The Techmark 100 index fell 291.1 or 6 per cent to 4,586.42 and there were some big falls in individual technology stocks as investors rushed to take profits after the recent remarkable run for the sector.
Baltimore, which only entered the FTSE 100 on Monday, slipped 12.8 per cent to £90.23, compared with a recent high of £140. Freeserve fell 9.7 per cent to 480p, compared with its peak of 930p.
Last week's much-heralded new issue, lastminute.com, slipped 16.3 per cent to 320p, well below the 380p flotation price.
Credit Suisse First Boston calculated that, even before yesterday's falls, the average technology, media and telecom stock was 10 per cent below its all-time high and 10 stocks had dropped 20 per cent from their peak.
Investors were clearly cautious ahead of the US Federal Reserve's interest rate decision, which was not announced until almost three hours after the London close. While the blue chips held up, the FTSE 250 dropped 75.4 to 6,523 and the SmallCap index slipped 29.7 to 3,398.8.
Even before the Chancellor spoke, February's retail inflation had not been too encouraging. The 0.5 per cent monthly rise in prices was slightly higher than expected and took the underlying rate of inflation up from 2.1 to 2.2 per cent; the government's target is 2.5 per cent.
Interest rate worries have subsided in recent weeks but there is always the chance that a run of inflationary data could prompt the Bank of England into action again. Leading stocks look fairly aggressively valued. The price-earnings ratio on the FTSE 100 index had hit an all-time of 31.6 at the close on Monday, while the dividend yield had dropped below 2 per cent for the first time. The shift followed Monday's addition of some loss-making non-dividend paying companies to the index.
The blue-chip benchmark now stands at a 60 per cent rating premium to the FTSE 250 and a 78 per cent premium to the SmallCap index.
Turnover was 1.83 billion shares by the 6 p.m. count, modest by recent standards.
