The last day of a difficult month and quarter for London's equity market saw British share prices retreat to close around the session's lowest levels, burdened by a sell-off on Wall Street at the outset of US trading yesterday.
There remained real concern among London traders and fund managers that the next adjustment in British interest rates, marshalled by the Bank of England's monetary policy committee, could be upwards. That would bring renewed pressure on industrial borrowers and further anxieties for manufacturers and exporters worried about the possible further appreciation of sterling.
Dealers said the weakness of London owed much more to a general reluctance by British fund managers to get involved in the stock market ahead of some crucial economic news on both sides of the Atlantic.
But, if truth be told, the real reluctance to trade in London came from the anxiety of marketmakers and dealers to close their trading books as early as possible in order to get home and ready for the kick-off of the England-Argentina clash in the football World Cup.
"This is the real thing as far as the competition goes. The excitement level is lifting every second; its quite extraordinary," said the head of sales at one big European securities house.
The FTSE 100 index finished the session 52.0 lower at 5,832.5, not far from the session low of 5,825.0 reached about 30 minutes before the close.
And there was similar rough treatment for the market secondliners and small-cap stocks, which extended their recent poor performances.
However, some of the recently depressed engineering stocks and exporters drew comfort from broker recommendations pointing out that the recent selling of the sectors had been overdone.
The FTSE 250 index threatened to plunge through the 5,500 level, eventually closing a shade above that level, down 17.5 at 5,529.6, its 14th loss in 15 sessions. An early attempt by the sector to make progress ran into some determined selling. At its worst, the 250 index was down 18.5.
Similarly the small-cap stocks succumbed to waves of selling pressure, with that index closing down 11.3 at 2,606.4, the day's low.
Noting the relative performances of the various indices, David Manning, head of British equities at Foreign & Colonial Institutional, said: "At the stock selection level, the UK's last quarter looks like a classic case of irrational exuberance.
"It does not seem so bad on the downside. If you look at stocks like Standard Chartered or Billiton, there are fundamental reasons for downgrades there."
On the short-term outlook, Mr Manning said: "There are quite a few uncertainties that could trip up the market. Problems in Asia and Japan are serious and could cause global difficulties. London is not in control of its destiny any more. I can't help feeling there is a chance of a setback in the markets."
