Shares in London retreated yesterday as the latest US interest rate move turned out to be an anti-climax.
Wall Street had slumped late on Tuesday after the Fed had cut rates by a quarter of a percentage point, as expected.
Investors appeared disappointed by the accompanying statement which was not particularly encouraging about the economic outlook. Both the Dow Jones Industrial Average and the Nasdaq
Composite closed sharply lower on Tuesday.
The FTSE 100 index Footsie accordingly began the day on the back foot, dropping 57.3 to 5,373 in the first quarter of an hour.
But the mood quickly turned as more encouraging news arrived. In Germany, the Ifo index of business sentiment was much stronger than expected, hinting at the possibility of recovery in Europe's largest economy.
The International Monetary Fund agreed a further $8 billion (€8.7 billion) loan to Argentina, heading off the possibility of a default and devaluation that might have unsettled markets.
By mid-morning, Footsie had reached its high for the day of 5,471.6, up 41.3. In the afternoon, however, sentiment shifted again as an early rally on Wall Street fizzled out. Blue chips lost all their gains and the FTSE 100 index closed down 21.6 at 5,408.7.
The FTSE 250 and SmallCap indices were effectively flat, the former falling just 3.2 to 6,159.8 and the latter inching up 0.1 to 2,730. The Techmark 100 fell 13.04 to 1,491.45, leaving the index of tech stocks 74 per cent below its all-time closing peak.
The latest technology profits warning came from IQE, the semiconductor materials group; its shares fell nearly 14 per cent, the worst performance in the FTSE 250. Baltimore, the internet security group, received a rather better market reaction to its plans for job cuts and a corporate restructuring.
On the economic front, the latest estimate of second quarter GDP growth showed a 0.3 per cent quarter-on-quarter rise, as before, but the detail showed that service sector output growth rose 0.8 per cent while manufacturing fell by 2 per cent.
"The theme that clearly emerges from the data is one of continuing imbalance in the performance of the economy," said Simon Rubinsohn, chief economist of Gerrard Limited. Turnover was modest, with 1.73 billion shares traded by 6pm.
