A NATIONWIDE preoccupation with "Mad Cow Disease" and its implications for the various sectors of the stock market, plus a sudden realisation that the scare could have big implications for the economy, weighed heavily on share prices yesterday.
The market's two main indices, the FTSE loo and the FTSE Mid 250, lost their recently hard won 3,700 and 4,300 levels.
At the close of a rather tense and unhappy session, the FTSE 100 share index was left nursing a 25.1 decline at 3,681.9.
It was only the constant feeling that another big bid, or series of bids, could appear at any moment that prevented a much steeper fall in the market.
And the recent confident performance of the FTSE Mid 250 index, which has been founded on takeover prospects, mostly in utilities, was undermined by hefty losses associated with the beef scare. The FTSE Mid 250 lost 7.8 at 4,296.5.
Dealers complained that turnover had been badly affected by the beef disease worries. At 6 p.m., trading volume in equities had reached 690.1 million shares, not too bad for a Monday, when market activity is traditionally restrained.
Volume was boosted by heavy turnover in a handful of smaller stocks such as Birse Group, Bula Queens Moat and Regent Corporation. The combined turnover of that group accounted for 82 million shares, or around 12 per cent of the total.
There were other reasons behind the market's disappointing showing but it was mostly the "Mad Cow" story that unsettled sentiment.
Reassuring comments by the government about the BSE scare did precious little to soothe frayed nerves in the market, where the biggest impact was in the food manufacturing and retailing areas.
Gilts came under early selling pressure after strategists pointed out the likely dangers to the public sector borrowing requirement and the balance of payments of any moves to destroy Britain's dairy and beef herds. Towards the close they rallied well, however, finishing well up on the day in the wake of firm US treasury bonds ahead of today's Federal Open Market Committee meeting.
Some substantial selling of stocks, such as Northern Foods and Unigate, both heavily involved in milk sales in Britain, plus equally significant weakness in animal feed stocks such as Harrisons & Crosfield and Dalgety, drove the market sharply lower from the outset.
Dealers also pointed to the damage the beef scare had done to the government's credibility. "This whole thing has run out of control and is damaging sentiment in the market; the government will not be forgiven for this one," said a senior trader.
The day's takeover speculation focused principally on Thorn EMI, where dealers became increasingly excited about a rumoured bid from Time Warner and Ladbroke, where talk of a takeover offer from any one of three companies has long been in the market.
