A market that appeared to be up when it was really down revealed its true colours by the afternoon and ended lower for the fifth successive trading day. First thing yesterday morning, the FTSE 100 index appeared to react well to the latest downturn in Asian equities. Although Japan's index was off 2.6 per cent, Footsie moved higher shortly after the 9 a.m. opening and managed a gain of 35 points at best.
But the rise was an illusion. The weekend news of a deal between AT&T and BT, one of the market's most liquid stocks and its second biggest in terms of market value, was single-handedly responsible for the gains.
At best the telecoms giant, which rocketed on relief that it had finally managed to secure an international partner, contributed more than 34 points to the Footsie performance.
But even BT's £6 billion sterling deal was unable to prop up a market besieged by Asian concerns, last week's comments by the chairman of the US Federal Reserve and UK profit warnings.
By lunchtime, when it was clear that the US market would be under pressure as soon as New York trading began, Footsie had turned the corner.
The index spent the afternoon struggling with a deficit of about 30 points and slumped in the last half hour to end the day 56.2 points lower at 5,836.1.
Once the net gain of BT was stripped out, the underlying fall was more than 70 points, although overall market volume was more symptomatic of languid summer holiday activity than a scramble for the last helicopter out of Hanoi.
The FTSE 250, more affected by the recent spate of profits warnings but less susceptible to international market pressure, slid 23.2 to 5,497.4 while the SmallCap ended 13.6 off at 2,506.4.
Those performances gave little encouragement to the optimists and suggested a continuation of the recent range-bound performance.
One strategist expected the FTSE 100 to stay in his fair value range of 5,700 to 6,000 in the short term.
There were reports that today's quarterly industrial trends survey from the Confederation of British Industry will show a further dip in business confidence because of the persistent pressure of the strong pound.
And sector analysts shied away from making optimistic comments ahead of the start of the big summer reporting season. Eight Footsie companies, including Abbey National, BAT Industries, Guardian Royal Exchange, Halifax and Glaxo Wellcome are releasing figures this week. Last week's shock profits warning from ICI has left the market expecting the worst, particularly from Glaxo.
The UK's biggest company by market cap is already forecast to produce a 25 per cent slide in first-half figures because of the patent expiry of Zantac, the ulcer drug. But some bears say the downside could be greater.
Volume by 6 p.m. was 667.1 million shares, evenly divided between Footsie and non-Footsie stocks. At that level, the turnover was easily below the three-month average but well above last Monday's figure of 580 million.
