A strong set of US economic data reawakened fears of a interest rate hike in the States next week and sparked a three-figure opening loss in the Dow.
The gloomy background was further blackened by a sharp fall in bond prices which sent the US long bond yields up to within a whisker of the psychologically important 6 per cent threshold. Market old hands argued that at these yield levels, bonds are a tempting alternative to equities.
The jittery start of their American peers unsettled London blue chips and triggered a modest bout of selling.
Profit-takers entered the market as most of the buyers were heading for the exit and the leading stocks were left exposed. Volume was fairly thin and most market players talked of a buyers' strike rather than a stampede towards the exit. The second liners were also hit, with the FTSE 250 losing 51.6 points to 5763.6 and the Small Cap shedding 6.9 to 2581.1.
Cadbury Schweppes was one of only eight blue-chips to survive the onslaught. The drinks and chocolate group swirled 15p higher at 827p amid positive noises over its pounds 1.1bn sale of its non-US beverages to Coca-Cola. The deal has been plagued by regulatory concerns across the globe and the Cadbury share price has suffered from fears that it might be scrapped. The new rumours, however, suggest that some of the watchdogs are to clear the deal, possibly as early as next week.
The other blue-chip risers had to thank some friendly brokers. Kingfisher put on 21.5p to 849p after SG Securities and Williams de Broe said "buy". The two are impressed by the merger with ASDA, up 3.25p at 190.25p. The software group Misys surged 7.5p to 517p after a Credit Lyonnais recommendation, while Vodafone rang up a 11p rise to 1,187p as fund managers filled their kitties ahead of the completion of the Airtouch takeover. Colt Telecom soared 38p to 1,289p on the back of the sector consolidation fever.
Legal & General outpeformed the market, losing just 1.25p to 174.5p after another day of heavy trading. Rumours of an offer by Lloyds TSB, down 24p to 884p, or a European peer, remain.
Marks & Spencer was on the cut-price shelf, shedding 15.25p to 391.25p. Results next week are going to be awful and broker WestLB Panmure expects a first half profit-warning. Rumours that Warren Buffett was about to reveal his stake in M&S did not help. Another Buffett favourite, Unilever was in the doldrums, falling 25.25p to 560.75p.
EMI was one of the biggest-falling blue-chips Concerns over the music group's strategy and fading bid speculation pushed it down 29.25p to 472.75p. BSkyB shed 7p to 586.5p after confirming that Tony Ball will replace Mark Booth as chief executive.
Food stocks were excited by the bid for Hillsdown Holdings, by the US fund Hicks, Muse, Tate, Furst. The offer should be pitched at 120p-125p and Hillsdown rose 4.5p to 117p.
The milk stocks caught the consolidation bug. Dairy Crest, up 17.5p to 289p and Express Dairies 2.5p higher to 129p were favourites for a merger or a bid by a financial buyer. An ABN Amro push also helped. Unigate, flat at 445p, also mentioned.
The cash-and-carry group Booker put on 6.5p to 86p after selling its food distribution unit for a better-than-expected pounds 124m.
The chemicals were in demand as overseas bid speculation and improving markets boosted sentiment. Yule Catto, up 17p to 345p, and Croda International, 9p higher at 281.5p, were yesterday's chosen two. Laporte, up 15p to 727p, is another one to watch.
Jarvis, the much-fancied rail maintenance group, rose 13p to 472.5p after signing a peace deal with the RMT union. The engineer AEA Technology moved 12.5p ahead to 339p. A stock overhang has been cleared and there is some talk of positive developments on its super-efficient diesel engine.
Arcadia led the retailers lower, plunging 25p to 257.5p on concerns that higher rates will choke off consumer spending. Debenhams, down 21p to 461.5p and Storehouse, off 5p to 145p, suffered the same fate. Safeway was the exception, rising 0.5p to 254p after another share buyback.
Aggregate Industries fell 2.25p to 81.25p amid talk that the merged M&G/Prudential has been reducing its position. Nycomed Amersham, the healthcare group, lost a 22p to 432.25p after a Merrill Lynch downgrade.
The computer group MDIS logged on a 2.5p rise to 32.75p. A recent good AGM and some rumours of corporate action were responsible. Brands Hatch motored 33.5p ahead to an all-time high of 361 after beating Silverstone to the British Formula 1 Grand Prix.
SFI, the pub group fizzed 6p higher at 226p after a bullish investors' roadshow. There is also some talk that it might spin-off one of its divisions. The airport group TBI nosedived 1.5p to 96p despite vague talk of a US bid. A BID for Jarvis Hotels could be just around the corner. The regional hotel chain soared 9.5p to 160p with over 1.5 million shares traded as rumours of a foreign strike intensified. The smart money is on an offer of 190-195p per share from a European rival, with some dealers talking of a big French group. Such a bid would value Jarvis, which last year had a turnover of pounds 136m, at between pounds 332 and pounds 341m.
IS ANOTHER investor set to jump on the Tradepoint bandwagon? The AIM-traded shares of the small rival to the London Stock Exchange jumped another 30.5p to 206.5p amid rumours that a large US broker is about to join Tradepoint's controlling consortium. The new player is rumoured to be prepared to pay a hefty premium to enter the ruling group which already includes Reuters and Morgan Stanley.
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