Wednesday's promising rally was reversed as poor corporate news and further anthrax scares caused losses in all the main indices yesterday. The FTSE 100 index had risen 120 points on Wednesday, but at its worst yesterday gave up nearly all those gains, falling 113.2 to 5,090.2.
The international background was not positive. On Wall Street, the Dow Jones Industrial Average had closed on Wednesday with a 151-point loss; in Tokyo, the Nikkei 225 Average fell 2.6 per cent. Anthrax scares continued in the US, keeping the potential for further terrorist attacks in investors' minds while tension increased in the Middle East following the assassination of Israel's tourist minister.
A significant profit warning from CMG, the Anglo-Dutch software group which was once a FTSE 100 constituent, together with a similar warning from SAP, the German software group, dealt a severe blow to technology stocks. The Techmark 100 fell 57.62 to 1,360.98 and Arm and Logica were two of the three worst performing Footsie stocks.
In terms of impact on the blue-chip benchmark, however, the fall in the oil giants BP and Shell was more significant with both shares declining as the crude prices slipped to a two- year low.
And there was a poor performance from banking stocks ,after a negative report from Goldman Sachs.
With Wall Street opening with merely a modest loss, the FTSE 100 recovered from its worst of the day to finish 87.4 down at 5,116.0. The FTSE 250 dropped 91 to 5,458.7 and the SmallCap 23.4 to 2,345.2.
Domestic economic data did not give a decisive clue to the direction of UK interest rates. Retail sales in September were slightly weaker than expected, rising just 0.2 per cent, although the August figure was revised higher. The annual growth rate slowed to 5.9 per cent from 6.5 per cent.
"Looking forward, we expect high-street activity to remain firm," said David Page at Investec. "Consumer confidence has held up reasonably well to date and the ILO measure of unemployment has only recently started to increase. Rate cuts from the Bank should support domestic demand and house-price growth remains strong."
