View from City Road: Market overlooks the fundamentals

Eurotunnel got its refinancing away in the nick of time, it seems. With the stock market crashing another 53.3 points yesterday, plunging back through the 3,000 barrier to its lowest level since last August, the new issues market has been declared as dead as a dodo. General Cable and TeleWest, the cable operators, are just the visible casualties. Behind the scenes investment bankers are telling hopeful clients everywhere, 'Don't call us, we'll call you'.

This is not quite yet a bloodbath - 3i is still planning to push ahead with its pounds 1.7bn float - but with the FT-SE 100 share index off more than 16 per cent since its February peak, it comes close. These days, the London equity market is driven more by charts than by common sense. When the Footsie slipped below 3,050 earlier this week all eyes were on a controversial chart that predicts that a slide through 3,050 means the next stop is 2,800.

Fundamentally, the market should at some point look like good value to cash- rich institutions. The economy is growing, and with companies still ruthlessly pruning costs the earnings outlook remains respectable even after a spectacular year of recovery. The Estimate Directory shows dividends repeating last year's 10 per cent growth rate.

The trouble is that equities have become so interest-rate and bond-market-sensitive that the earnings outlook seems to count for hardly anything. The slaughter in the futures market was helped along by an upward revision to first-quarter growth and inflation figures in the US, in turn fuelling fears that the most recent rise in US rates is just a foretaste. Sell in May and go away has once again been proved sound advice.