THE MARKET closed lower yesterday, hit by growing fears of a US rate hike and a negative reception to the Lloyds TSB's bid for Scottish Widows. The FTSE 100 ended down 55.9 at 6496.5 in high turnover. The index spent most of the day in negative territory as dealers fretted over the possibility of a US rate rise next week. But news that the Bank of England had voted by a larger-than-expected majority to cut rates two weeks ago helped pare losses. The FTSE 250 closed 18.2 lower to 5,906.9, while the Small Cap finished 1.1 up at 2653.1.
STOCKS OPENED the day mixed as market sentiment was dominated by concern over a possible rise in US interest rates.
The Dow Jones fell 65.85 points to 10,655.78 by 11.20am, while the Nasdaq held firm. The market remained constrained ahead of next week's meeting of the Federal Reserve's interest-rate setting committee, when rates are expected to rise by a quarter point. Traders said they still anticipated good news on corporate earnings given the relative lack of profit warnings in recent weeks.
EXPORTING companies, which have gained from the weakness of the yen, suffered profit-taking. The Nikkei closed down 190.87 points, or 1.07 per cent, at 17,586.75.
Sentiment was hit by the overnight fall in New York stocks, but the fall was checked by bargain-hunting for cheap stocks. Big exporters fell, including Sony, down 2.11 per cent at 13,020, and Fujitsu, off 2.72 per cent at 2,325. The market was underpinned by the Bank of Japan's commitment to a stable exchange rate around the 122 yen level - favourable for exporters.
SHARES CAME OFF as bears were encouraged by Wall Street's poor performance overnight. The Hang Seng closed down 28.84 points, or 0.21 per cent, at 13,976.04.
Traders said the New York fall had put an end to the recent surge in share prices. Stocks had risen by 4 per cent in the two preceding trading days. Raymong Chong, head of research at Dwo Heng Securities, said retail investors were only interested in China plays as the market awaited news of next week's meeting of the US Federal Open Market Committee.
THE XETRA DAX index fell 1 per cent to 5,399.11, affected by sliding prices on Wall Street. German shares were also affected by falling car and banking stocks.
The car sector was led down by concern over the scale of BMW's bigger- than-expected investment to save Rover, and rumours that Volkswagen was interested in taking over the Swedish truck maker Scania. Dresdner Bank led the banks down, falling 3.19 per cent to 36.40 euros on concern about its investment portfolio being hit by falling bund futures.