British stocks drifted aimlessly for much of yesterday's session, before clambering back into positive ground in the mid-afternoon after Wall Street came in strongly.
But the early strength in New York, where the Dow Jones Industrial Average put on 50 points, failed either to last or to attract many supporters to London stocks.
Dealers said the big institutions remained reluctant to trade in any substantial size ahead of the week's two important economic news items - the meeting of the Bank of England's monetary policy committee, which commences this morning, and Friday's US non-farm payroll report for May.
Rather unconvincing performances from Wall Street overnight and from the big Asian markets early yesterday saw London shares slip at the start of trading and remain in negative territory for much of the session.
There was no real support for equities from a weary-looking gilts market, which fell away in spite of better-than-expected consumer credit data for April, showing personal lending at less than £900 million sterling, compared with a forecast of £1.1 billion.
The two junior FTSE indices also spent much of the session in negative territory. The FTSE 250 settled 1.3 down at 5,897.6, while the FTSE SmallCap finished just 0.7 up at 2,762.5.
Turnover at 6 p.m. was an unspectacular 838.3 million shares.
The day was not without excitement. Railtrack delivered another excellent performance, ahead of an expected Commons announcement this afternoon by Mr John Prescott, the deputy prime minister, of the go-ahead for the Channel Tunnel rail link.
And there were reports that investors were switching between sectors. The strategy team at Goldman Sachs, the investment bank, revised its recommended sector strategy for Britain.
Goldman's team reduced weightings in banks and increased weightings in capital goods, basic industries and consumer areas, citing its view that there was a substantial risk that sterling would weaken further. "If it were to fall towards the DM2.60 level our currency team is targeting, the producing side of the economy could see a reversal of the negative trends in earnings expectations that have dominated performance for most of the past year."
Meanwhile, the strategy team at Credit Suisse First Boston (CSFB) said: "While no major markets will emerge unscathed if the Dow falls sharply, relative valuations should cushion Britain. Gilt valuations are at a 10-year high relative to Treasuries, while British equities are valued as lowly against the US as during the British recession of the early 1990s."
