The warnings that an interest rate cut had already been priced into the London equity market proved spot on yesterday as the 50 basis points reduction was greeted by a three-figure decline in the FTSE 100 index.
"We had already factored in a 25 basis points cut, and there was a lingering hope that 50 basis points would keep the pot boiling, but it soon became clear that even that would not be enough to drive us further ahead," said one market-maker.
The market's response to the Bank of England's monetary policy committee's decision was an instant flash of blue right across the trading screens, which transformed a pre-decision 80-point decline into a 40-point gain within seconds.
But after another few minutes, the market had made up its mind that an earlier downwards lurch by Footsie was correct. Thereafter, stocks struggled to cope with flurries of selling pressure from institutions eager to lock in profits after the phenomenal rally that has seen the FTSE 100 rise nearly 1,000 points from its October 5th low.
Some pointed out that market-makers had taken a classic opportunity to exploit momentary weakness in the market to replenish their depleted trading books, allowing them to pick off the stocks they were unable to cover in recent weeks.
When the dust settled, the FTSE 100 had dropped 143.1 to 5,479.8. At its worst, in mid-afternoon and when Wall Street was under moderate pressure, the index hit 5,467.9, down 155.0.
The mid and smallcaps also fell, but held up better than the leaders. The FTSE 250 ended the day 42.6 off at a session low of 4,928.8. And an 18-session sequence of gains in the FTSE SmallCap ground to a halt. The SmallCap closed 5.6 off at 2,061.0.
London looked stretched from the outset, after Wall Street had finishing well off its Wednesday peak and widespread losses across Tokyo and Hong Kong markets eroded confidence ahead of the rate cut outcome.
And there was a host of disappointments on the corporate front yesterday, with the insurance sector on the run from the start after disappointing third-quarter numbers from Royal & Sun Alliance, which also prompted big losses in CGU and GRE.
Shell's third-quarter figures were every bit as bad as the most pessimistic analysts had been warning of. The latest profit warning came from Micro Focus, the software group, which saw its shares more than halve at one point.
At least Boots managed to avoid shocking the market, unlike its fellow retailer Marks & Spencer earlier in the week.
Turnover at 6 p.m. was a robust 1.09 billion shares.
Market strategists were not downhearted by the sell-off. Mr Corey Miller at Paribas said: "We have come up a long way too quickly; those fund managers who missed out on the recent surge will have to chase it at some point."
He insisted there were four bull points sustaining the market: the bullish interest rate environment; the potential for a further decline in sterling; the potential for an easing of fiscal policy; and lastly, a continued squeeze in the stock market.
Boots reported a 0.8 per cent drop in profits and admitted that consumer confidence appeared to have fallen. But its shares rose 82p to 948p - the profits fall was blamed on investment rather than poor business.
Entertainment group First Leisure was not completely cheerful - like-for-like sales in its nightclubs and bars fell slightly, although family entertainment had improved since the summer and health was trading strongly. Its shares bucked the market though and rose 5p to 191 1/2p.
Railtrack, up 29p to £16.20, announced a healthy rise in its profits and insisted it was making good progress with its £17 billion programme to modernise Britain's railways.
Rolls-Royce, down 8 3/4p to 241p, won a multi-million-pound contract for engines to power new jets for British Midland.
