Despite the steadying influence of the RPI announcement, investors adopted a wait-and-see approach ahead of the outcome of the Edinburgh summit and the onset of the long three-week Christmas account.
Additionally, there is a growing belief that a cut in interest rates, which has practically been ruled out this side of Christmas, might not happen until the Budget in March.
There were also signs that speculators were putting their 1992 books to bed, eroding the recent strength of the futures market.
'All that is left to go on are corporate earnings, but they are unlikely to pick up until the second half of next year,' one dealer said.
On the inflation front, Chris Antony, an economist at UBS Phillips and Drew, said the picture was encouraging 'even if there might be a bit of a blip next year'.
He added that underlying inflation, which fell by 0.2 points, was 'clearly the more significant, as that is the figure the Government watches and which determines its attitude to the relaxation of monetary conditions.'
UBS had actually expected a rise in the underlying retail price index to 3.9 per cent, because it thought the effect of devaluation would have come through more quickly.
Stores were the main beneficiaries of the inflation news. GUS, which was still smarting from its poorly received results on Thursday, overturned an initial fall of 20p to close 12p better at pounds 16.30.
Other stocks in the sector, which has been undermined this week by profit-taking, also finished the session on a firmer footing.
Dixons, off 9p at one stage, finished the session at 268p, down 5p. Boots rose 5p to 524p, and Argos hardened 2p to 289p.
Away from stores, the takeover rumour spotlight fell once again on Tarmac, up 6p to 105p at one time. BTR, down 1p to 511p, was again tipped as the most likely bidder for Tarmac, which closed at 105p.
Trading in the construction group was reasonably strong, with more than 4.6 million shares changing hands by the close of dealings.
Besides the rumours, Tarmac announced that Anthony Collins, chief executive of the properties division, which the company is winding down, has resigned from the main board.
Shares generally enjoyed a respite from downgradings, which have been in vogue for most of the week. Those that did not escape, however, included Ladbroke, Prudential and United Biscuits.
Ladbroke, down 4p to 180p, suffered at the hands of Smith New Court, which has lowered its sights to pounds 191m for this year and to pounds 220m for the following 12 months.
Credit Lyonnais Laing brandished the rubber on Prudential's numbers, slicing pounds 35m off its forecast for this year to pounds 415m. There was speculation that Kleinwort Benson would follow suit.
Prudential, down 11p to 281p, was also overhung by concern about its exposure to the losses arising from Hurricane Andrew, which are said to be higher than original calculations.
Hoare Govett was understood to have joined the growing ranks of houses to take a bite at United Biscuits' numbers. The shares, off 6p in early dealings, closed 2p off at 335p.
First Leisure climbed 7p to 307p, following Thursday's positive remarks by Lord Rayne, the chairman. Rank Organisation added 5p to 66p, and Thorn- EMI improved by 9p to 813p.
Nerves ahead of figures on Monday unsettled Tiphook, which fell by 25p to 284p. Interim profits are forecast to fall from pounds 39.2m to around pounds 35m.
Unilever, 2p firmer at pounds 10.64, avoided the solemn mood with investors encouraged by a stronger dollar against sterling. It is also paying pounds 16m for 70 per cent of Poland's state-owned Slaskie Zaklady Przemyslu Tluszczowego edible oils and fats business.
British Thornton was surprisingly one of the most actively traded shares. Allan Cloggie, who left as chief executive of the contract packer in October, has sold his 3.9 million shares. The company, which returned to profit in 1991/92 after several years of losses, is said to be benefiting from its contract with Sega, the maker of computer games. Shares rose 1p to 12.5p.
Forte shares returned to favour following an analysis by BZW of the company's sale of Gardner Merchant, the purchase of Sogerba and the Agip joint venture. While the three deals will have a minimal impact in 1992/93, BZW says profits and interest payable will alter a year later. It says the shares, up 3p to 167p yesterday, remain a good long-term purchase.
There seems to be no stopping Tadpole Technology, the computer work-station company that made its debut on the stock market on Monday at 65p per share. The shares continued to forge ahead yesterday, buoyed by continued demand. There was talk that one of the big four Japanese houses had expressed an interest. The price advanced a further 48p to 194p.Reuse content