The shares, in quiet trading, rose 5p to 531p with few investors prepared to take new positions ahead of tomorrow's full-year results, which are expected to show a pounds 200m loss against a pounds 1.2bn deficit last time.
The stock market has been in two minds about BAe since last year's record-breaking run.
The shares started this year at 420p, but once the surprise Rover deal was announced, they surged spectacularly to 584p. However, doubts have set in since.
There are hopes that despite the group's obvious distress, it will manage a dividend increase, perhaps 8p a share against 7p. But the book loss on the Rover sale could present a problem. NatWest Securities says: 'The shares may well pause for breath in the short term but we see scope for further outperformance over the longer term.'
The rest of the stock market was weighed down by worries about international bond markets.
Although New York was holidaying instead of trading, the feel from unofficial transatlantic bond trading was not encouraging.
Government stocks reflected the unease, dropping by more than a point. There was little confidence in Europe as further falls occurred.
The markets were on tenterhooks ahead of today's speech by Alan Greenspan, the US Federal Reserve chairman. There is a nagging worry he will advocate higher US interest rates.
It is generally accepted that another hike in US rates would signal the end of the worldwide trend to cheaper money. Although further British reductions are needed in view of last week's signs of a faltering economic recovery and the pending tax increases, any American increase could make a British move unrealistic.
Cheaper money has been one of the main forces behind the strength of shares. In the near term the market is likely to remain shackled if the Government is prevented by international considerations from again lowering the cost of money.
The FT-SE 100 index ended 32.3 points down at 3,350.3, with the chartists drawing comfort from the market's ability to close above what they see as the crucial 3,350 level.
This mark has for some time been the base of the chartists' support. Once such a level is pierced, the talk is that the index could drop to 3,200.
Such thoughts, however, have little relevance to such simple considerations as trading levels. If there was much selling yesterday it was well disguised. Seaq put volume at a pitiful, by recent standards, 506.1 million. Much of the decline stemmed from the inevitable futures trading.
Wellcome dropped 13p to 643p as Greig Middleton said sell because of the recent fall in Retrovir sales which could be hit still further by the expected negative Concorde study due at the end of this month.
But after the market had closed, another investigation, as if to underline the vulnerability of investment judgements, said Retrovir had reduced by two-thirds the risk of transmission of HIV from pregnant women to their babies.
Imperial Chemical Industries was another weak performer. The year's figures are due on Thursday and there is a growing suspicion they will be even more disappointing that at one time envisaged.
With James Capel, Kleinwort Benson and NatWest among those saying sell, the shares had little chance in the gloomy climate; they ended 14p lower at 760p.
Unilever, the Anglo-Dutch food giant, ran into a little profit- taking ahead of today's results. The shares fell 7p to 1,199p. NatWest looks for profits of pounds 2.32bn against pounds 2.03bn.
Drinks were weak with the profit warning from Merrydown, the little cider group, doing the damage. Merrydown touched 140p, closing at 159p, off 54p. HP Bulmer and Taunton Cider felt the squeeze. Brewers were also hit with Bass off 11p at 508p.
Properties failed to respond to the increased presence of the awesome international investor George Soros. British Land, with which he has close links, has taken a 29.9 per cent interest in Stanhope, famed for its Broadgate development in the City.
Although Stanhope gained 14p to 42p, British Land and most other property groups gave ground.
Trans World, the radio group, rose 19p to 178p on the looming battle for control, with Owen Oyston declaring he will sell his 24 per cent interest.
LWT (Holdings) shaded 2p to 743p as the market became increasingly convinced that Granada will win the television takeover battle.
Middlesex Holdings, once a Welsh goldminer called Clogau, rose 0.5p to 5.75p as it strengthened its ties with the former Soviet Union. Masoud Alikhani, with a reputation as an international metal dealer, and supporting investors have 29.9 per cent and yesterday Alexander Vladislavlev joined as an executive director. He is expected to meet investors tomorrow.
Another return from the corporate graveyard. On Thursday, details are expected about the revamp of Embassy Properties, suspended at 3p. Shares are likely to be on offer at about 1p. Chairman TY Wong, whose Hong Kong family interests acquired half of Embassy in 1992 for pounds 2.35m, is intent on rebuilding. First move is the takeover of a storage business.
The FT-SE 100 index slumped 32.3 points to 3,350.3 and the FT- SE 250 index 41.6 to 3,983.9. Turnover was 50.61 million shares from 32,894 deals. The account ends on Friday with settlement on 7 March. Government stocks were again weak.
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