They have been in ragged retreat over the first US interest rate increase and, with stories circulating of investment houses suffering huge losses, there are fears that forced selling, already evident, will accelerate.
The so-called hedge funds have found the more restrained investment climate difficult to accommodate. Many have clearly experienced sharp rebuffs.
But the City is deeply worried that some more established institutions have endured a savage mauling and are likely to be forced to dump gilts to rescue their positions.
Government stocks, many down by more than 11 per cent this year, followed what has become a worrying pattern, opening higher but ending in a state of unease. They closed across the maturity spectrum with falls of up to half a point.
Interest rate worries have done much of the damage. Today Kenneth Clarke, the Chancellor, meets Eddie George, Governor of the Bank of England, for their monthly discussion on interest rates. Their last move was a modest cut which was not well received, being judged more a political than an economic manoeuvre.
They must now decide whether to indulge in another cut, which could be regarded as compensation for the coming round of tax increases. It may not, however, be popular in the stock market and would do little to ease the Government's own funding requirements.
Any reduction is likely to signal the end of the cheaper money trend. Indeed, there is a growing body of opinion that the authorities may soon have little alternative but to lift interest rates. Already building society bonds are suggesting an increase.
Today's auction of variable rate gilts could bring a little relief. But any relaxation is, until the present uncertainty ends, likely to be short-lived.
The FT-SE 100 index ended 6.1 points down at 3,123.4 after scoring an early 15.4 gain. Another dismal New York display added to the gilts-inflicted gloom.
Banks shrugged off the depression, helped by Salomon Brothers, the US house. Lloyds, up 6p at 568p, enjoyed the added support of positive UBS comments.
Bass enjoyed Hoare Govett support, up 9p to 533p, and Unigate, up 7p to 366p, was helped by Smith New Court nudging its forecast to pounds 108m.
British Aerospace fell 5p to 501p as it confirmed what had been suspected - overseas shareholders had exceeded their 29.5 per cent limit. They have reached 29.53 per cent and will have to find British residents to buy the excess shares or allow BAe to sell them for the 'best price reasonably obtainable'.
Rolls-Royce, on fears that its foreign limit has been topped, fell 6p to 175p.
Cadbury Schweppes dipped 5p to 471p despite a revival of hopes that it is about to clinch a deal with the US soft drink giant Dr Pepper-Seven Up. It is suggested it has won a boardoom seat which would allow it to equity account and be earnings enhancing.
Should Cadbury gain boardroom representation it would probably kill the persistent rumours that it will be forced into a big rights issue to finance a takeover bid for Dr Pepper, the third biggest soft drinks group in the US.
Eastern Electricity was the outstanding utility performer, up 12p to 662p. Its steady buy-back programme is providing the shares with an effective support level.
Rights issues continue to flow. British Biotech rose 5p to 470p following a pounds 46m call and Pentos, seeking pounds 45m, fell 1.5p to 29p. Misys, after pounds 25m, gained 2p to 513p and Alexander Proudfoot, a mere pounds 9.6m, improved 3p to 71p.
Newcomer Domnick Hunter, a maker of filters for compressed air and liquids, did well. Placed at 200p, the shares eached 224p.
Coal Investments, suspended at 76p, closed at 84p. The company raised pounds 10.3m to develop two colleries.
The Opec stalemate continued to undermined the crude price and weigh on oil shares. British Petroleum retreated 9.5p to 356.5p.
Creston Land held at 17p as Beeson Gregory placed the rights rump at 15.25p. Other big trades were seen in property group Chelsfield (7.6 million), down 1p at 159p, and CrestaCare (9.3 million), unchanged at 39p.
Saatchi & Saatchi fell 3p to 137p as the market awaited possible management changes following a directors' meeting. Acorn Computers, on hopes it will float its chip offshoot, rose 6p to 76p.
Starmin, the hard-pressed aggregates group, held at 3.5p. It has said it hopes to buy a construction group. Talk is that it is about to clinch the takeover of a Scottish operation.
European Motor Holdings advanced 8p to 153p following the arrival of Sir Tom Cowie as a director. His former group, T Cowie, fell 4p to 297p.
The FT-SE 100 index, after an early 15.4-point advance, fell back and by the close was down 6.1 at 3,123.4. The FT-SE 250 index rose 3.1 to 3,788.8. Turnover was 673.7 million shares with 41,243 deals. The account ends on 8 April with settlement on 18 April.
Merrydown, the cider group, is rumoured to be in the predatory sights of a European drinks group. Some point the finger at Pernod Ricard, the big French producer which owns Irish Distillers. The shares rose 9p to 148p. They have been weak following a surprise profit warning and the departure last week of the finance director, Mike O'Driscoll.
Sir David Lees, chairman of the GKN engineering group, met Alan Jones, his counterpart at Westland, the helicopter group, yesterday. After a 40-minute meeting, they agreed there was a 'considerable gap' between their respective valuations. GKN, down 4p at 547p, has until tomorrow to increase its fiercely contested 290p-a-share bid for Westland, unchanged at 325p.Reuse content