CONCERNS that the March 25th meeting of the US Federal Reserve's Open Market Committee might bring an increase in US interest rates weighed heavily on European stock markets yesterday and London was no exception.
The FTSE 100 index was never comfortable, opening around 13 points lower and retreating to a session low of 4,394.0 shortly after Wall Street opened. It closed the day 24.8 off at 4,397.7.
The FTSE Mid-250 stocks were also being sold, but never in big size, dealers said. The SmallCap looked like launching another attack on its all-time high, but ran out of steam to finish 0.1 off at 2,374.1.
Rate rise fears have reappeared over the past couple of sessions, driving Wall Street lower. The latter was pressured on Wednesday, when the Dow Jones Industrial Average lost 45 points and again at the opening yesterday when the Dow shed 30 within minutes of the bell. More worryingly for London, the Dow was 100 points weaker two hours after London closed.
Those losses came in the wake of a higher than expected 0.8 per cent increase in US retail sales in February. Weekly jobless claims fell 5,000. So with those two pieces of data pointing to a stronger US economy, the US bond market came under pressure.
London's stock market also had to contend with a sharp fall off in attendances across the City's dealing rooms, with many traders and fund managers seeking the counter attraction of the Cheltenham National Hunt racing festival, always one of the City's favourite events.
Gilts were instantly affected by the news from the US, slipping even further and eventually finishing the day between 9 and 12 ticks lower. That brought more pressure on an already unsteady British equity market which embarked on a rapid slide.
Strategists said the US data was the latest to be on the high side of expectations and had increased perceptions that the Fed could raise rates. But one added that the chances of the Fed moving as soon as March 25th were no better than fifty-fifty, which meant the Dow could be volatile.
