Another well-received set of results from a big bank failed to lift shares in London, in the face of a generally negative international background yesterday, with traders nervous about the direction of interest rates in the US, Germany and Britain.
As the market started a week which will see the monetary policy committee decide whether to push up British interest rates again, there was some early volatility for the FTSE 100 index. Footsie hit its low for the day, down 25.3 at 4,874, just before 9 a.m., before rebounding more than 30 points to the session high, 4,907.2, within 25 minutes.
An early fall on Wall Street, after Friday's economic statistics which suggested that the Federal Reserve might yet have to raise interest rates this year, weighed on sentiment. The Dow Jones Industrial Average was down 50 points at one stage before recovering to be 10 points off when London closed.
European bourses were also depressed, amid some fear that the Bundesbank might be forced to raise German interest rates to defend the D-Mark, which has been dropping sharply against the dollar.
Gilts were weak, with the benchmark 10-year issue down by around a quarter of a point. And the market got no relief from sterling, which continued to hover around DM3.04.
All this weighed on share prices, with Footsie ending 3.6 points off at 4,895.7. The FTSE 250 index closed 3.4 lower at 4,485, while the SmallCap index dropped 0.1 to 2,188.6.
The market was spared one adverse psychological factor, however. Late last week, FTSE International decided to postpone until September the move from quoting dividends on a net, rather than a gross, basis after the abolition of tax credits in the budget.
The change, which would have reduced the quoted yield on the All-Share index below 3 per cent, was scheduled to start from yesterday. The new plan is to quote yields in both gross and net terms.
Once again, much market activity was spurred by corporate results. HSBC, like Lloyds TSB on Friday, soared on the back of its figures, continuing the out-performance of financial stocks which has characterised 1997. The rise in HSBC was equivalent to more than six points on the Footsie.
Figures from Pearson, the media conglomerate which owns the Financial Times, were also well received but the effect of sterling on results from British Airways meant that the airline's shares were the worst performers in Footsie.
Mr Robert Buckland, British strategist at HSBC James Capel said: "It's the same old story. Sterling continues to hurt some groups and market leadership remains with many of the same stocks."
Volume was subdued as the holiday season started to get into full swing. Only 599.2 million shares were traded by the 6 p.m. count, of which 51 per cent was in non-Footsie stocks.
