Interest rates were not raised, but the market clearly believes it was a temporary respite.
Shares were in ragged retreat as soon as trading started. Modest rallies, as the Bank of England attempted to support the pound, soon petered out with the poor UK trade figures piling on the agony. Near the close the index was down almost 60 points. Then the appearance of a few small bargain hunters trimmed the fall.
But trading was again thin. There was no wave of panic selling. Indeed turnover was only 383.7 million shares, with Footsie stocks accounting for just over half the business.
Trading volume could easily have been the lowest this year had not a leading securities house, thought to be Smith New Court, conducted a programme trade with a sell bias.
The fall, according to Datastream, cut pounds 10.6bn from market values. It was the steepest decline since the attempted overthrow of Mikhail Gorbachev, then Soviet president, in August last year. That fright removed pounds 16.5bn as the index slumped by 80.5 points.
Government stocks were also hit, suffering falls of about pounds 1. Tomorrow's pounds 2.5bn gilts auction could be a very subdued affair.
Interest rate-sensitive shares took the bulk of the equity carnage. With the market taking the view that a 1 per cent increase could be forced on the Government, brewers, builders and retailers had a particularly difficult time. The weakness of the dollar eroded many internationals.
Even utilities, which have survived the market storms this year better than most, lost some of their enthusiasm. But gains were still scored. Severn Trent rose 3p to 422p as Kleinwort Benson suggested the shares should outperform other water stocks in the next six months.
But British Gas, reporting figures today, fell 1p to 243p. British Petroleum achieved a modest response to a buy recommendation from the US securities house First Boston. At one time down 7.5p, the shares closed 5p lower at 185p.
Insurances had to contend with the added discomfort of the Florida hurricane. Royal Insurance, which is said to have 4 per cent of its insurance book exposed to Florida, fell 18p to 145p. Commercial Union, General Accident and Sun Alliance also gave ground.
British Aerospace was at one time below 200p, closing at 204p, a 6p fall. The Saudi Arabian decision to shelve a pounds 10bn military base is seen as throwing more doubt on the huge Al Yamamah 2 contract that is so important to the group.
Buy and sell recommendations made little impact. A trio of buy suggestions from SG Warburg failed to pierce the gloom. The subjects, BAT Industries, Cadbury Schweppes and Unilever gave ground, but perhaps not as much as they would have down.
Warburg said the builder George Wimpey was a sell, lowering the price 11p to 99p. Kleinwort suggested P&O should be sold and the shares lost 14p to 317p.
Euro Disney suffered another bashing. For a time the shares were below their 707p floation price. They closed 78p down at 715p, unsettled by dividend worries underlined by the Independent on Sunday.
Amstrad touched 19p, ending 1p lower at 21p on dividend fears.
But even the most gloomy of markets produce a few bright spots. The cider maker HP Bulmer was one. Since its figures last month the market has grown more enthusiastic about the outlook for the company and the industry. The shares, up 8p at 248p, have risen 50p since Bulmer announced profits of pounds 17.1m.
Forte, the hard-pressed catering and hotel group, firmed 3p to 130p on hopes that it is near to finding another buyer for its contract catering arm. The French Sodexho group is reported to be prepared to pay pounds 400m.
Brickmaker Ibstock Johnsen and architect CMW Group edged ahead, following buying by directors, and Aerospace Engineering doubled to 10p with results much better than expected.
The insurance broker Willis Corroon fell a further 9p to 156p with the dividend payment accounting for 3.3p. The company is expected to cut its final dividend but Lehman Brothers, the US investment house, has switched its share forecast from neutral to outperform.
Trafalgar House, another tormented by dividend worries, fell 5p to 43p. The building materials group Redland lost 22p to 381p amid fears its dividend will be reduced.
The stock market was in despair yesterday. The FT-SE 100-share index slumped 54.6 points to 2,311.1 and is only eight points above its year's low, hit earlier this month. The FT 30-share index lost 41.7 to 1,713.7. Trading volume was again low. Only 18,919 bargains were logged.
Maddox was unchanged at 7.75p. It has raised pounds 16.5m through a placing, with the open offer closing today. The cash has allowed the acquisition of Wakebourn, a computer services group. It is likely to be the last deal involving a share issue for at least 18 months. 'We are not involved in a paper chase' said Hugo Biermann, chairman, who has a 14 per cent interest.
Simpsons of Cornhill, the restaurant group, believes it has enough support to defeat rebel shareholders, led by Robert Klapp, at Thursday's special meeting. The shares rose 2p to 39p. Mr Klapp and his associates, who are said to have a 40 per cent interest, want to oust the board, headed by Roy Ackerman, and former Midsummer Leisure man Paul Reece.Reuse content