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The best performing sector was household goods, which rose 0.61 per cent. The leader in the sector, Reckitt & Coleman, rose by the same amount after brokers issued research reports upgrading the stock. Shares also benefited as they are not regarded as interest rate sensitive, so escaped the heavy selling in the rest of the market.

Stocks listed under the alcoholic beverage index rose 0.59 per cent. Guinness was responsible for most of this gain after its 1996 results were well received by the market.

The worst performing sector was retail banking, which dropped 8.2 per cent, hurt by the prospect of a US rates rise, which is expected to dent profit growth.

The second worst sector was tobacco which fell 8.1 per cent after a US cigarette manufacturer agreed to settle litigation by 22 states. Investors thought this could damage industry defences against other liability lawsuits. BAT Industries was one of the European tobacco companies worst hit because it has substantial market share in the US. Copyright: IOS & Bloomberg