At one time it was down 46.4. It was pulled off the floor as New York trimmed early losses and government stocks reduced their initial falls to around a point. Footsie was last below 3,500 at the end of last month.
The late recovery failed to mask the acute disappointment left by the outcome of the auction, the first time the Bank of England has experienced an under-subscription.
The failure to get all the pounds 3bn sale away, with its implications for interest rates, tax cuts and the Government's future funding, came at a time the stock market was already feeling a little disappointed by the unchanged US interest rates. Few expected a movement but confirmation was hardly cause for celebration.
At first the gilts reaction was more pronounced in the futures market. But as the session progressed there was a steady dribble of cash sales with overseas investors much more active than their domestic counterparts.
With the dollar and sterling giving ground and US bonds weak there was suddenly precious little joy for the bulls, who have based much of their case on the weight-of-money argument. Traditionally equities enjoy a strong gilts market. Judging by yesterday's performance, with quotes closing around one point down, such support may be difficult to find in the near future.
A few shares always manage to shine through even the deepest gloom. British Biotech, one of the bio babes which has had a volatile career since it arrived three years ago, ignored the gilts debacle in splendid style.
The shares surged 62p to an 830p peak as it signed an agreement for Glaxo Wellcome to develop its oral drug for the treatment of arthritis. Glaxo, up 3p at 762p, will make a pounds 3m down payment, followed by royalties.
ML Laboratories, after a few days of modest profit-taking. returned to favour, gaining 24p to 295p.
The company is said to be telling analysts it could receive a big boost from the drug cocktail therapy which is proving more successful in the fight against Aids. Trails of its D2s Aids drug are said to have gone well, with talk of results exceeding expectations.
More gloom engulfed builders, with Costain and Tarmac giving group figures. Trafalgar House, hoping to sell its house-building side, fell 3p to 30.5p, a new low.
Vodafone, the mobile telephone group, tumbled 15p to 253.5p as worries surfaced about the next set of sales figures. US sellers led the charge.
Eurotunnel had another distressing experience, tumbling 12p to an 89p low as Capital, the US investment group which is one of the tunnel's biggest shareholders, cut its stake to 7.11 per cent, selling nearly 16 million shares.
"Windfall" tax worries continued to plague electricities. There is a growing impression the industry could be hit hard in the Budget. A pounds 2.5bn demand is feared. Northern Electric, off 23p at 752p, was a main casualty as the market fretted about its weakness in a "windfall" raid following its handout to shareholders to thwart Trafalgar House. The plug was also pulled on PowerGen, down 17.5p to 551p, and National Power, down 15p to 515p.
Waters, which have not enjoyed the spectacular surge experienced by the electricities, dipped a little lower, with Thames off 7p at 522p.
Coal Investments lost 11p to 87p on a profits warning and Cray Electronics shaded to 44.5p on tax deals.
Insurance brokers were ruffled by downgrades from Kleinwort Benson and SBC Warburg.
Scottish & Newcastle fell 10p to 611p as Robert Fleming repeated its sell recommendation and Kleinwort suggested a switch into Whitbread.
Servisair, held at 211p as Securum, owned by the Swedish Government, sold its remaining 40 per cent interest in the airline support group. In what appeared to be a brought deal Cazenove sold the shares to institutions at 200p.
The upheaval in the main market made little difference to the rush to join AIM.
VDC, a distributor of veterinary products, arrived at 585p, up from 550p on the 4.2 market, and Meltek, a computer services group, and Pan Andean, seeking oil in Bolivia, will materialise today.
Zergo, an information security group, Lancashire Enterprises, a services group, African Gold, a Zimbabwean miner, and Guiton, publisher of Jersey's Evening Post, are due tomorrow.Reuse content