WEAKNESS in Wall Street, brought on by fears of a rise in US interest rates spilled over into the City yesterday, sending UK blue chips more than 20 points lower.
The London market was rattled by a 45-point overnight drop in the Dow and sentiment soured further when Wall Street fell another 50 when it reopened for business. Analysts said signs of economic growth in the US increased expectations that the Federal Reserve will tighten credit later this month.
The benchmark FTSE-100 share index closed 24.8 points lower at 4397.7, as decliners led advancers by 68-to-29. Turnover registered 741 million shares.
The Mid-250 index of second-line shares eased 4.9 to 4720.2.
Gilts were weaker in a lacklustre session as US Treasuries set the pace. The June long gilt future was about three-eighths of a point lower at just above 111.
Most markets across the Channel were also in the doldrums. Frankfurt's 30-share DAX index, which had been storming ahead this week, ended down 65.59, or 1.92%, at 3349.81. In later screen trading, the IBIS DAX was 21.34 lower at 3361.06.
French shares climbed back off the day's lows but closed slightly softer. The Paris CAC-40 blue-chip index finished down 9.60 at 2632.10.
In the City, a few stocks bucked the weaker market trend, including independent oil exploration and production group Enterprise Oil which reported a 77% increase in pre-tax profits to #355m. The dividend was raised 1p to 17p.
Enterprise benefited from higher oil prices - average realised oil price was #13.17 per barrel against #10.72 in 1995 - record production, significant discoveries which strengthened the revenue base, and tight control of costs and margins.
NatWest Group took a hit after revealing that losses on interest-rate swaps had widened to #77m from its forecast of #50m. The stock eased 5p to 739p.
Shares in household products group Reckitt & Colman halted their recent sharp advance after the group's profits of #316.5m did not impress the City. The shares slipped 2p to 787p.
Dealers rewarded Legal & General for its decision to stick to its pledge, issued last year, to raise the dividend 14% for the year. The stock gained 5!sp to 411!sp.
Record annual earnings from Mirror Group failed to prevent the shares slipping 7p to 209!sp.
Edinburgh-based Christian Salvesen announced the planned sale of its US refrigerated warehousing business CS Inc and said it was talking to several potential purchasers. Its shares were up 8!sp to 312p.
Scottish hi-tech medical equipment maker, Shield Diagnostics, soared 87!sp to 805p.
United Biscuits bounced back into the black last year with a headline pre-tax profit of #24.4m and the results sent the shares up 12!sp to 250p.
Drugs giant Zeneca tumbled after negative comments from NatWest. While Zeneca shed 23!sp to 1814p, Glaxo Wellcome was dragged down 14!sp to 1125p and SmithKline Beecham lost 9p to 933p.
Yorkshire-Tyne Tees TV plunged 117!sp to 1163p after Granada said it had no current plans for a takeover bid.
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