Blue-Chip stocks in London lost nearly all of Tuesday's gains as concerns about the outlook for corporate profits dimmed the brief burst of euphoria that followed the US purchasing managers' survey.

There was disappointment at the start of trading that the rally on Wall Street had fizzled out. The Dow Jones Industrial Average had gained more than 200 points at one stage on Tuesday, fuelled by hopes that the US economy might be recovering.

But the Dow ended just 47 points ahead and below the 10,000 level.

The FTSE 100 index dipped to 5,312.9 in late morning trading before a modest recovery. When Wall Street opened again, it had a choppy beginning, with the Dow bouncing around on either side of the 10,000 level.

Footsie subsided once again towards the close, hitting a low of 5,306.6, before finishing 63.6 off at 5,316.0. But the blue chip benchmark did finish above the year's low.

The other indices were also weaker, with the FTSE 250 down 51.3 at 6,039.8 and the SmallCap off 14.3 at 2,672.5.

The Techmark 100 slipped 30.08 to yet another all-time low of 1,439.25.

The Techmark's poor performance was hardly surprising given the hammering taken by the telecom equipment stocks.

French group Alcatel issued a cautious trading outlook while Merrill Lynch downgraded Motorola.

At home, Marconi shares took a fearful battering, falling 28 per cent as investors worried about the company's financial health in the wake of Tuesday's profit warning and executive departures.

Telewest and Colt also suffered double digit losses.

But the sell-off was broadly-based with only two Footsie stocks Canary Wharf and BHP Billiton managing gains of more than 2 per cent on the session. The economic news gave little comfort to those hoping for an imminent cut in UK interest rates.

The purchasing managers' survey of the services sector showed a small rise to 50.9 from July's 50.3, indicating that the largest sector of the UK economy is continuing to expand.