UK traders were about to wrap up a fairly dull day when the rumour that the US Federal Reserve chairman could leave after the Fed meeting of 24 August started doing the rounds.
The whispers came from afar. Speculation of an early departure of the powerful Fed chief, who this week celebrates 12 years at the helm, seemed to have originated in Latin American dealing rooms and was quickly picked up by a US Internet chat room. The rumours were fanned by uncertainty over the Fed's succession policy.
Mr Greenspan's contract runs out next year - shortly after the presidential election - but the US government can renew or cancel it at any time between now and then.
The Fed itself declined to comment, leaving the market's fertile imagination to its own devices. Most dealers argued that, after presiding over an unprecedented bull market and US economic boom, Mr Greenspan might want to step down and enjoy retirement.
The results of all this were that the FTSE 100 closed well off its highs, rising 36 to 6014.4.
The leading index rallied up to 70 points in the early afternoon as fears of a domestic rate hike were eased by the Bank of England's inflation report and some bargain-hunters moved in after Tuesday's 148-point drop.
However, the Greenspan rumours unsettled Wall Street and the FTSE 100 saw nearly half of its early gain disappear in the last two hours of trading.
Volume was thin, not helped by the fact that the trading ground halted in midmorning when sky-gazing dealers squared their books and went out to watch the eclipse. The smaller indexes could not keep up with their big brother and the FTSE 250 ended 1.1 down at 5925.1, while the Small Cap closed 3.2 down at 2709.9.
Some of Tuesday's big casualties recovered.
Dixons led the blue chips higher, soaring 54p to 1095p after house broker Cazenove set a 1,200p price target and advised investors to buy the stock. Dixons' Internet treasure-trove Freeserve rebounded 3.5p to 181.5p in sympathy with US web stocks.
Retailer Arcadia was also buoyed by net talk. The Dorothy Perkins-to- Burton group put on a smart 12p to 232p amid talk of a deal for its web provider Zoom.co.uk, co-owned with Daily Mail & General Trust, up 19p to 3245p.
BSkyB climbed 22p to 583p after forecast-busting growth in digital viewers. This is good news for digital decoder-maker Pace Micro, up 3.5p to 198p.
The telecom stocks - the market's great unloved - staged a bit of recovery, before being hammered in late trading on whispers of a large seller or some derivatives-link deals. BT was a typical example. Bargain-hunters propelled it to a day's high of 941p but late selling pushed it back to 913p, up a mere 2p.
Colt Telecom survived the afternoon bears, shooting 56p better at 1253p after in-line interims and an upbeat trading statement.
Among financials, insurer Sun Life & Provincial firmed 18.2p to 430.25p on rumours that today's interims will bring the sale of GRE's life assurance business to Aegon. Old chestnut Reckitt & Colman, the consumer products giant, flushed 22p higher to 815p on returning speculation that Procter & Gamble of the US or Unilever, down 18p to 575.5p, could trump its merger with Dutch rival Benckiser.
Chemical group Elementis rose 8.5p to 116.5p on vague takeover talk and more substantial hopes that its recent restructuring will spark a share rally, while rail maintenance specialist Jarvis steamed 18p ahead to 296.5p on whispers of a pounds 400m contract to upgrade the West Coast Main Line.
Some electricity stocks shrugged off fears over today's regulatory price review. Powergen surged 23.5p to 603p amid tenuous talk of a US deal, Scottish & Southern Energy buzzed 12p higher to 555.5p, while Scottish Power rose 3.5p to 530.5p. However, National Grid fell 8.75p to 388.5p.
Despite the improving mood, there were a lot of bear stories around. Insurer Prudential plummeted 32.5p to 873p on talk of a large sale order handled by Warburg Dillon Read. Advertising giant WPP shed 15.5p to 573p on rumours that a large investor had gone short. Shell, 13.5p lower at 518p, and BP Amoco, down 20p to 1205p, were undone by fears of Opec quota- busting and oil oversupply.
Airtours nose-dived 7.5p to a six-month low of 412p after confirming that holiday trading is tough. The warning sent rivals First Choice, 9p lower at 163.5p, and Thomson, down 1p to 128.5p, into a tailspin. Computer group FI plunged 26.5p to 362.5p after a Merrill Lynch downgrade.
Biotechs starred in the minnows. Tepnel Life soared 6.5p to 19.5p after the famous investor Colin Blackbourn bought a 2 per cent stake. The purchase sparked a wave of optimism on Tepnel's DNA analysis work.
Rival Xenova rose 6p to 69.5p on hopes of good news at today's interims, while medical devices group Biocompatibles surged 2.5p to 120p on talk of lucrative deals for its products. Coffee Republic brewed 1.25p higher to 17.75p amid talk of a strike from a larger rival.
SEAQ VOLUME: 922.3m
SEAQ TRADES: 65,226
GILTS INDEX: 104.88 -0.41
THE PUNTERS were piling into computer group Calluna yesterday on hopes of an important announcement at next week's shareholders' meeting and revived bid talk. The excitement left the designer of disk drives 12.5 per cent - or 1.5p - higher at 13.5p in hefty volume. Calluna could tell investors on Wednesday that a major computer maker has decided to take up its new Type II drive. Other rumours suggested an industry giant, such as Mitsui, could launch a bid.
ENTREPRENEUR STEPHEN Dean is busy these days. The small company specialist yesterday launched a new venture VoyagerIT.com - a cash shell with over pounds 1m in the bank. The company should list on AIM in two weeks and plans to buy small web start-ups. At the same time, Mr Dean is considering the future of his construction tiddler Artisan. The group has been eyeing larger rivals such as Tay Homes and Galliford for a while and a deal is not impossible.Reuse content