A measure of calm returned to the equity market yesterday as dealers preferred to focus on the positive developments in overseas markets and ignored the overnight 2 per cent slide in the most potent of all global markets, Wall Street.
Many had expected London stocks to come under heavy fire for the third day running after the 157-point retreat by the Dow Jones Industrial Average. The Dow fell almost 200 points at its worst on Wednesday, following news that the US Federal Reserve's open market committee had left interest rates on hold.
The positives for London came from the Far East, where Hong Kong posted a 1 per cent gain, and where the Tokyo market finished flat.
The US market came in on a firm note yesterday, although trading well off its best levels as London closed for the day.
But there remained an overriding worry around London's trading desks that the steep falls in Far Eastern markets over recent weeks, and the knock-on effects across the globe, would eventually affect the profits of US and European companies.
There was a flurry of speculation across the market that a series of top-down inspired profits downgrades may well be imminent.
At least one of the big US brokers is thought to have instructed its analysts to work its top-down expectations into British earnings estimates, and it is said that many of the British and European houses are contemplating similar actions.
"It means there will be another turn of the screw in the equity market," said one analyst. London, he continued, still felt "very vulnerable to such earnings downgrades".
He said the longer the weakness in Far Eastern markets went on, the more severe the impact on the market would be. "Once the bad news gets into the market, the worse it will get in the short term," he said.
The FTSE 100 index kicked off the day in good form, reflecting the Fed's no-change policy, and quickly moved up to hit a session peak of 4,740.3, up almost 20 points, before losing ground for the rest of the day.
The index slipped into negative territory shortly after Wall Street opened, testing the 4,700 level and eventually settling a net 9.4 off at 4,711.0.
The FTSE Mid-250 index was similarly affected, and finished 17.8 down at 4,563.3 while the FTSE SmallCap index lost 3.2 at 2,288.6. The AllShare index settled 5.15 down at 2,238.43.
The more settled feel to Far Eastern markets helped Cable & Wireless, whose shares were in strong demand all day, while results from Railtrack propelled the shares to the top of the FTSE 100 performance table.
Turnover in equities came out at 729.9 million shares, of which 54.5 per cent was in non-Footsie stocks.
Far East-linked stocks recovered some lost ground as HSBC firmed 1p to £13.83 but Standard Chartered fell 1/2p to 611p on early profit-taking.
Among those reporting results were Railtrack, which revealed a pretax profit of £190 million sterling, up from £173 million at the same time last year. Shares steamed ahead 95p to £10.30 after the group said it believed it could maintain its level of growth.
Burton Group, which is to demerge its Debenhams department store, revealed a lower annual pre-tax profit after the £54.9 million cost of the move. This boosted shares 7 3/4p to 139 1/2p. High-street catalogue chain Argos rose 10p to 658 1/2p on the back of upbeat comments by brokers.
Capital Radio tuned in a 9 per cent rise in pre-tax annual profit to £35.3 million, up from £32.1 million at the same time last year.
The result was struck on a positive leap in turnover to £113.6 million, up from £77.8 million last year but shares fell 11 1/2p to 472p after DJ Chris Evans revealed he was considering a rival bid for Virgin Radio.
