A £450 million sterling share buy back programme from National Westminster Bank failed to rouse the London stock market from its summer lethargy yesterday as investors continued to be nervous about the prospects for Wall Street.
The fall in the US market on Monday prompted the FTSE 100 index to start the day with a 13 point deficit. Although there was a brief flurry when Wall Street opened higher yesterday, as US employment data calmed fears of an imminent interest rate rise, Footsie never made it into positive territory.
With the Dow Jones Industrial Average just three points ahead at the close of London trading, Footsie ended the day 10.3 points down at 3,668.5, more than wiping out Monday's rise. The low for the day was 3,661.2. The FTSE Mid-250 index slipped 7 points at 4219.1.
Domestic news did not inspire the market. The indications were that, as expected, the monthly meeting between Mr Kenneth Clarke, the Chancellor of the Exchequer and Mr Eddie George, the governor of the Bank of England, had resulted in no change in British interest rates. Gilts were uninspired, with the 10 year benchmark issue finishing the day roughly flat.
With just one trading day remaining, the FTSE 100 index looks set to record its third consecutive monthly decline, the first such sequence since the end of 1994. Footsie has lost a net 21 points since the start of the year.
"The motivating factor is quite clearly concern about Wall Street," said Mr Tim Brown, UK strategist at UBS. "Opinion is hardening about the Federal Reserve raising rates on August 20th. It shouldn't have huge implications for the UK but it is not surprising in a thin market, if investors are picking up Wall Street's uncertainty." Mr Brown is sticking to his end 1996 forecast for Footsie of 3,800.
At least, turnover picked up with volume rising to 673.6 million shares by the 6pm count. However, around one fifth of that came from the NatWest buy back programme, with the bank repurchasing just over 72 million shares at 626p (overall market turnover figures count both the purchase and the sale of the NatWest shares).
The buy back programme was widely anticipated and failed to lift either the bank's shares or sentiment about the overall market. Institutional investors have been building up liquidity in recent months but have shown little interest in reinvesting their cash in UK equities.
Retail business on Monday was a paltry £1.05 billion, less than half Friday's level.
Apart from the NatWest programme, the main corporate news was the agreed £133 million bid from Whitbread for the Pelican restaurant group. The deal re emphasised the current fascination with themed restaurants Rank recently paid £270 million to take full control of the Hard Rock cafe chain.
It also caused some activity in the sector, as traders marked up the prices of some theemed restaurant groups, but marked down those pub chains where Whitbread was seen as a potential purchaser.
