The London market made an attempt at a rebound yesterday but a poor opening on Wall Street ensured that the closing gains were modest.

The FTSE 100 index had started the day in rally mode, after Wall Street had recovered from its early losses on Thursday. But the bounce was not accompanied by massive buying.

Markets have definitely moved into holiday mode, with just 1.64 billion shares traded by the 6pm count, of which 260 million were Vodafone.

There was little in the way of big corporate news to move the market and not much volatility among the blue chips, with no individual FTSE 100 constituent rising or falling more than 5 per cent.

A late flurry left the index 24.3 ahead at 5,427.2. That leaves Footsie 21.7 per cent below its peak, still in bear market territory.

The FTSE 250 rose 15.1 to 6,092.0 while the SmallCap fell 3.5 to 2,719.8. And the Techmark 100 advanced 3.01 to 1,523.98, still 73.5 per cent below its peak.

Over the week the FTSE 100 fell 2.2 per cent, the 250 1.7 per cent, the SmallCap 2 per cent and the Techmark 100 fell 5 per cent.

Investors' hopes will now be pinned on the prospects for a rate cut from the US Federal Reserve, and perhaps from the European Central Bank, to revive sentiment before the markets get back into full swing in September.

And, after the Bank of England's inflation report on Thursday, there is the hope of further rate cuts in Britain.

Next week will see some crucial economic data for Britain, with retail prices, average earnings and retail sales all being released.

While market valuations look expensive in historical terms, they are not in relation to short-term interest rates or bond yields; gilts advanced about a quarter of a point yesterday and are yielding below 5 per cent.

Tony Jackson, UK equity strategist at ING Barings Charterhouse Securities, said the market is facing a problem of uncertainty, in the face of the debate about the US productivity miracle and the outlook for the technology and telecoms sectors.

"It does not feel to us as if the market is ready for a rally at this point" he concluded.