British stocks fought in vain to extend their recent extraordinary run, but were unable to resist the downside pressures being exerted on European markets by Wall Street. The latter kicked off the US session under light pressure, sliding 20 points within five minutes of the opening bell and taking a rather weary-looking London market with it.
By the close, the FTSE 100 index settled 10.3 lower at 5,177.1. The FTSE 250 index, similarly under a cloud for much of the session, rallied towards the close to finish 0.6 firmer at 4,781.6. The FTSE SmallCap resisted the downside pressure, nudging up 1.3 to 2,305.6.
Earlier, London had clawed its way back into positive ground, after an initial poor opening triggered mostly by Wall Street's performance on Monday - when the Dow Jones Industrial Average closed 38 points lower - and a rather mixed performance by Far East markets.
London's pick-up began despite rather mixed economic news for last month. Headline inflation remained at an annual rate of 3.7 per cent and the core figure, targeted by the government, was unchanged at 2.8 per cent, higher than the market had expected.
But the inflation news was offset by evidence from the British Retail Consortium of faltering retail sales in November. The news from the high street, as well as unsettling some of the retailing stocks, was interpreted as reducing the need for further rises in interest rates in the short term.
The takeover speculation that has encompassed the banks and other financial sectors of the market intensified yesterday.
It drove the two banks seen as most likely to be involved in bids or mergers - Barclays and NatWest - even higher, although dealers attributed much of the rise in the former to a "buy" recommendation from Cazenove, the stockbroker.
Other big winners in the financials included Alliance & Leicester, which benefited from a switch recommendation, and Royal & Sun Alliance, where the market remained convinced a buy-back operation was not too far away.
A senior trader at one big European securities houses said London looked set to continue its pre-Christmas run-up.
