Footsie dropped to 4883.6, down 102.2 points, at mid-morning, but closed just grazing the 4,900 mark, down 87.2 points at 4,898.6.
Investors did not need a crystal ball to predict which companies would suffer the most. Financial stocks, particularly those with interests in the Far East, were marked down most heavily. Standard Chartered was once again thrown to the lions - or should that be the Asian tigers? - and plunged 46p to 682p, heading the league of Footsie fallers. HSBC was also left licking its wounds as it closed down 82p at pounds 14.85. The pair dragged other banks with them, with Woolwich and Halifax both worse off at the end of trading.
One company with Hong Kong influences which proved an enigma yesterday was Cable & Wireless. Having shed 16.5p in the morning, C&W reversed its losses and by the end of the day was the most wanted blue chip, up 13.5p to 527p. Dealers said the company was being re-evaluated in the light of the bidding war for MCI, the US telecoms group.
Leaving Yamaichi-inspired shock waves to one side, an array of profit warnings and negative trading statements sent several third-division stocks plummeting. Bluebird Toys found itself out of pocket, after it said its results for the current year would fall below market expectations. The shares dropped 18.5p to 81.5p on news that Mattel, Bluebird's international distributor, would not distribute its Polly Pocket toy in North America next year.
European Telecom also suffered after a profit warning of sorts. It fell 51p to 261p after Warren Hardy, chairman and chief executive, said the dramatic rate of growth would inevitably slow down in the short term.
Bid speculation fuelled a handful of stocks, despite the falling market. Allied Colloids has been up and down like a yo-yo in the last week. The company was forced to confirm it was in merger talks with an unnamed suitor last week, but the love affair was never consummated. The shares were expected to plunge this morning after Friday's announcement after trading closed that merger talks had been terminated. In the event, a hostile US bidder emerged over the weekend - Hercules Corporation - and Allied led the second-division climbers to finish up 41.5p at 167.5p.
Allied's gains supported the rest of the chemicals industry. Albright & Wilson improved by 3.5p to 162.5p, and Manders ended 2.5p better off at 147p.
There were other bid targets to choose from yesterday. Dealers were shopping at Safeway, for example, which jumped 6.5p to 325.5p. It was buoyed by Deutsche Morgan Grenfell, which believes the shares are now undervalued following last week's profit warning. The market hoped a foreign buyer might step in, or alternatively that the merger with Asda Group might be resuscitated. Asda eased 6p to 162p.
Hanson also benefited from takeover hopes. Some market-makers believed last week's exit of Robert Hanson, son of his Lordship, could flush out a bid for the company. It ended 6.5p up at 290.5p. Dealers said the Lafarge bid for Redland had raised awareness of the aggregates sector.
Water stocks were again enjoying a veritable flood of buyers, after Credit Lyonnais Laing said it was very positive on the sector. Severn Trent, continuing a good run last week, was among the best Footsie performers yesterday, climbing 20p to 960p. The company reports interim results today. Continuing hopes of a share buyback, and rumours of small acquisitions appeared to be driving the stock. Anglian Water firmed 10p to 830p, and Wessex Water added 4.5p to 511.5p.
Great Universal Stores was momentarily in demand on the strength of a buy note from Merrill Lynch. The catalogue home shopping company added as much as 34p at one point, but closed unchanged at 706p.