That attempt to stop a raging bull market in its tracks failed as share prices quickly resumed their upward path.
Yesterday Mr Greenspan had another go, with some success. In testimony to the US Senate, he hinted that US interest rates may have to go up to check inflation and questioned the sustainability of recent stock market strength.
In response Wall Street dropped by over 100 points in early exchanges and London fell in sympathy, hitting a low of 4,316 before institutional buyers emerged to leave the FTSE-100 15.4 points adrift at 4,329.3.
Company results again provided the main focus for dealers. Standard Chartered firmed 13.5p to 783.5p after posting 1996 profits at the top end of the range and raising its dividend by almost a third. SBC Warburg and SocGen were among the many brokers making positive noises about the investment bank.
Insurers were a mixed bag. Profits in line with market expectations saw the Prudential Corporation hang on to a 4.5p gain to close at 567.5p, but Commercial Union finished 24p weaker at 666p amid disappointment that its stated net asset value of 545p was 55p below forecast. Guardian Royal Exchange was the weakest blue chip, down 10p at 273.5p on further consideration of this week's results.
GRE's apparent enthusiasm for acquisitions, coupled with its relatively large exposure to UK motor insurance business, makes the shares a sell according to Japanese broker Nikko.
Barclays, 5p better at 1,127p, was the most active stock with over 35 million shares changing hands as brokers Cazenove and BZW went into to the market to buy back some of the bank's shares for cancellation.
Away from financials one of the main talking points was Grand Metropolitan, down 16.5p to 273.5p on fears of a burger price war being sparked by McDonald's' reported decision to slash the price of Big Mac from $1.90 to just 55 cents in a bid to jump-start sales. Last year McDonald's operating profits in the US fell by 9 per cent. John Wakely, analyst at Lehman Brothers, thinks McDonald's renewed focus on value - code for price cuts - could cost Grand Met's Burger King pounds 15m both this year and next.
That, he argues, raises the question of why Grand Met needs to own Burger King at all, not least because it offers no synergies with the rest of the food and drinks conglomerate and offers investors little or no upside.
As a result, Mr Wakely expects pressure for a Burger King spin-off to mount. One possible outcome is that if capital gains tax problems on disposal can be solved Grand Met could spend up to pounds 2bn raised from a trade sale on buying back its own shares.
Leading media stocks were weak on vague talk that the proposed digital terrestrial television alliance between BSkyB, Carlton and Granada may run into regulatory problems. BSkyB is also facing a revolt from several pub chains about the price it charges them to screen live Premier League football matches. BSkyB ended 10p lower at 610, Carlton closed 16.5p off at 460.5p while Granada eased 2.5p at 815.5p.
But the day's booby prize went to Pace Micro Technology. News of a second profits warning this month and the sudden resignation of joint chief executive Barry Rubery sent the shares crashing 71p to 86p. The shares were as high as 241.5p as recently as November. Volume was a hefty 19.5 million shares.
Traders expect the shares to bounce this morning on hopes that a contract to make at least 150,000 digital set-top boxes for BSkyB will still be awarded.
Merrill Lynch cut shares in paper maker David S Smith to ribbons as the broker slashed its forecasts to reflect cheaper continental paper prices.
The shares hit a year low of 252p, down 6p as Merrills noted that prices for testliner and corrugated board are about 20 per cent cheaper in Germany than the UK, causing significant import pressure for domestic producers such as Smith. The strength of sterling is another worry.
As a result the US broker has lowered its pre-tax forecast for this year by pounds 15m to pounds 85m and trimmed the 1998 estimate back by pounds 20m to pounds 115m.
Newcomer Aortech, the artificial heart valve manufacturer, made an pulsating stock market debut, closing 13.5p above the125p placing price.Reuse content