It could be argued that the fragility of the stock market had at last been exposed. Some traders cited the problems over a German bond auction as the prime reason for the setback, but with selling relatively modest many were left with the impression that some panicky marking- down by the market-making fraternity was the main influence.
Even so, the FTSE-100 index suffered its biggest reverse since February, falling 68.4 points to 3,020.7. Datastream calculated that pounds 15.6bn was wiped off values.
The slump reinforced worries about the fall extending below 3,000 points. Such a development could provoke a wave of overseas selling as performance funds were forced to adjust their approach to the British market.
A degree of Continental selling is thought to be a factor in the market's weakness. Dutch selling, never regarded as significant in the past, was cited as an influence. It was suggested the Dutch, following the German warning that interest rates had fallen too quickly, were reassessing their attitude to the British economy.
But a sudden manifestation of the market's long-running depression was probably behind the crash. Since shares peaked in February it has been assailed by an array of bearish influences.
Domestic interest rates and US inflationary and interest rate pressures have been at the forefront. Continuing political uncertainty, Conservative and Labour, as well as worries about the strength of the move out of recession have taken their toll. The apparent growing government antagonism towards dividend payments was also an influence.
There is no doubt this week's batch of cautious statements have left their mark, offering power to those who fret about the slowness of any economic revival.
It is also worth remembering that investors still harbour huge profits. Since the inglorious retreat from the exchange rate mechanism shares have boomed. The prospect of profits being gradually eroded must tempt many to snatch the still considerable gains they still enjoy.
Government stocks, weighed down by European bond markets, were again weak, despite the relative success of the pounds 2bn convertible gilt auction.
Even water shares, which had enjoyed a tide of their own since the industry regulator started sending out proposals about profitability, found the flow too strong.
The Camelot lottery victors experienced a mixed response. Racal Electronics put on 13p to 238p and De La Rue rose 3p at 830p. But Cadbury Schweppes, assailed by cash call fears, lost 13p to 479p.
The image of the winning consortium was not enhanced by a sharp fall in New York of the shares of G Tech, with a 22.5 per cent stake. It is reportedly under investigation following allegations about its lottery operations.
Saatchi & Saatchi, the advertising group, was seen as a beneficiary of the Camelot success. The victory could be worth pounds 50m in fees a year, lifting the shares 4p to 133p.
Among the unsuccessful lottery contenders, Rank Organisation fell 25p to 380p and Thorn EMI 39p to 1,029p.
Eurotunnel's rights agony continued, with the shares falling 5p to 355p. Details could be announced today. It looks as though the price will be 270p.
P&O, the shipping group, continued to feel the impact of the price cuts by its cross-Channel rival Stena Sealink. The shares fell 16p to 635p.
Fisons, at one time up 5p, fell victim to the market retreat, clinging to a 2p gain at 141p. Greig Middleton believes the shares are undervalued, looking for profits of pounds 102.5m this year, reaching pounds 158.5m in 1996.
Liberty, the retailer, rose 10p to 610p as rebels, Concerto Capital and Insas Berhad, said they spoke for 16.8 per cent, and were watching developments. They met chief executive Patrick Austen yesterday. Liberty recently equalised its share structure.
Signet, ex-Ratners, fell 1.25p to 37.25p. Top management is said to be in the US, fostering thoughts that the jeweller is about to sell its US operation, which could command a pounds 600m price. Such a sale would transform Signet. US vulture funds are hovering and South African investors Brian Myerson and Julian Treger are threatening to force a restructuring.
Paramount, the least known of the new-style pub chains, is raising pounds 5.4m through a one-for-one rights at 9p. Much of the cash will be used to buy 28 pubs from Greenalls Group. But Paramount's brewery shareholders, Bass and Burtonwood, and Greenalls are not taking up all their rights; the balance has been placed by London Wall Equities. Paramount held at 11p.
Butte Mining, one of the British companies pursuing legal claims in the US, edged ahead 0.25p to 3.25p. Its claim of more than pounds 600m will not be resolved for possibly two years. In the meantime it has secured its future by reducing its involvement in Australia. A rights issue by its former down-under subsidiary and the sale of its remaining interest should produce pounds 200,000.
The FT-SE 100 index collapsed 68.4 points to 3,020.7 after touching 3,011.3. The FT-SE 250 lost 62 to 3,629.4. Turnover was 646.1 million shares with 26,185 bargains. The account ends on 3 June with settlement on 13 June.
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