A sell-off in the highly influential pharmaceuticals sector and some profit-taking in the mortgage lenders were behind a rather disappointing performance by London's benchmark index, the FTSE 100, yesterday.

But the weakness in the top index did not spill over to the rest of the market. On the contrary there were decent gains in the other main indices, particularly the 250.

There was no disguising the overall lack of activity in the stock market as the summer holiday season built up to peak levels. Much of the enthusiasm generated by Barclays' bid for the Woolwich on Wednesday began to wane especially in Alliance & Leicester and the lack of any corporate news of real substance meant dealers and salesmen had to work hard to encourage the few fund managers still at their desks to deal.

Wall Street's performance overnight was hardly helpful, with the Dow Jones Industrial Average sliding 71 points, although the Nasdaq Composite managed a minor gain. And US markets were equally awkward yesterday; the Dow moving higher early in the session only to dip back to show a minor decline shortly afterwards. It was virtually level as London closed. The Nasdaq Composite looked uncomfortable as well, falling more than 50 points.

At the close the FTSE 100 settled 26.7 off at 6,387.3, having fallen to a session low of 6,369.4, down 44.6 in mid-afternoon. The FTSE 250, meanwhile, climbed 26.1 to 6,823.3, just short of its session high of 6,824.0. The FTSE SmallCap also gathered itself towards the close, pushing up 5.9 to 3,388.9. Economics were not a significant factor. There was no follow-through to Wednesday's concerns about the Bank of England's inflation report, which said there was a risk that inflation could climb above the government's 2.5 per cent target within the next two years. Gilts were marginally higher, helping to underpin the equity market.

Dealers are now focusing on today's US economic news which brings data on retail sales and producer prices.

The weakness in drug stocks came as a direct result of the news that a US court had removed the three-year patent protection on Eli Lilly's Prozac drug. UK drug stocks were persistently sold in sympathy.

The insurance sector also had a hard time of it, with some traders increasingly uneasy over the massive damage caused by the forest fires raging in the US.

Turnover in equities reached 1.26 billion shares.