The odd bright spot in the market yesterday could not disguise an underlying nervousness before Thursday's meeting of the Bank of England's interest rate-setting committee.
Dealers are increasingly concerned that the Bank will opt for a rise this week following growing evidence of the strength of the economy. The latest sign of this came from an upbeat housing market report from Hometrack yesterday showing that prices rose in July for the fourth successive month. By the close the FTSE 100 had fallen 46.6 points to 5928.3, a slide accelerated by a weak opening on Wall Street. However, as befits another summer's day, share volumes were light. It seems a far cry from last week, when the market saw its biggest weekly gain since March 2003.
Financials were generally weaker, with HSBC 3p lower at 971p despite the bank reporting a better than expected 18% rise in half-year profits.
Property shares were under the cosh on rate rise fears, with Liberty International 28p lower at £11.43 and Slough Estates down 16p to 664p.
Sugar group Tate & Lyle managed to buck the trend, rising 18p to 685p. A trade agreement late last week between the US and Mexico on sweeteners could lead to a cut in the Mexican tax on fructose, which would benefit Tate's US business. There is also continuing strong demand for its sucralose and ethanol products, and the current price of sugar on the commodities markets means Tate is likely to make higher profits from its trading business. Broker Evolution has a buy recommendation on the shares, with a two-year price target of 900p. Goldman Sachs was also positive, raising its six-month target from 660p to 700p.
Another day, another major firm's shares rising on bid speculation. Yesterday it was water company Severn Trent. It added 25p to £12.98 on talk of a £5bn takeover plan by US private equity groups Kohlberg Kravis Roberts and Apollo Management. The company said it had received no formal or informal offers, and the shares fell back from an earlier high of £13.53.
Pharmaceuticals group Shire was the largest percentage riser in the FTSE 100, up 23.5p to 863.5p - a 2.8% gain - as UBS told clients to buy the shares.
The long awaited debut of the merged chemists Alliance UniChem and Boots proved a damp squib. Shares in Alliance Boots, as it is now known, fell 20.5p to 786p as analysts were underwhelmed. Broker Seymour Pierce repeated its underweight recommendation, while Dresdner Kleinwort said sell and set a 690p price target.
But ITV was the day's biggest faller in the FTSE 100, down 2.75p to 97.25p on continuing worries about the weak advertising market, flagging ratings and speculation over the future of chief executive Charles Allen.
Cadbury Schweppes slipped 2p to 523.5p ahead of tomorrow's half-year results, which should show some of the impact of the scare over salmonella in chocolate. Evolution said half-year margins would be hit by higher raw material costs and sentiment by the salmonella problems, but added that this should provide a buying opportunity since the rest of the business is performing well.
JJB Sports climbed 1.5p to 181.5p on speculation that Mike Ashley, owner of Lillywhites and SportsWorld, had built up a 9.96% stake in the sportswear retailer through contracts for difference and might bid for the business. Analysts at Seymour Pierce dismissed the tale, however. They reckoned Ashley could not bid without the support of JJB majority owner Dave Whelan, and also said any link-up between JJB and SportsWorld would run into monopoly problems. With JJB's profits set to fall, they told clients to offload stock following the share price rise.
Technology stocks were in demand after higher than expected second-quarter profits from Dutch semiconductor equipment maker ASM. So Wolfson Microelectronics added 21.25p to 452p, also helped by suggestions that an iPhone product was on its way from Apple. Wolfson supplies components to the US company.
Lower down the market, distribution group Premier Direct fell 8.5p to 37.5p after warning it would make a full-year loss. It has just discovered it will need to make "material provisions" in a couple of areas, including reviewing the value of its stocks.
Education group AdVal was 0.25p lower at 0.45p . The company is breaking itself up by selling off its businesses to various related and unrelated parties.
Full-year results from fuel cell group ITM Power did not impress investors. The shares fell 21.5p to 172p despite a couple of positive notes from analysts.
But Spanish-based estate agency Medsea Estates added 2.5p to 17p after it signed a deal with Saga, the tour operator for the over-50s, to become its key supplier of overseas homes.
Finally, to underline the international nature of the London market these days, two businesses from different parts of the globe began trading their shares. Chinese flue gas desulphurisation business Tinci Holdings closed at 82.5p, up from its 70p placing price, while US pharmaceutical group Napo rose from 83p to 90.5p.
Antennae up:
Keep an eye on MTI Wireless Group, a market leader in making antennae for fixed wireless broadband. Its shares added 4.5p to 42p after revenues for the half year rose 36% and operating profits climbed 61%. The company trades on a price-earnings ratio of less than 10 times, and has net cash representing 12p a share. Traders believe the share price has been hampered by events in the Middle East, since its parent company is based in Israel. But the troubles are unlikely to have any practical effect on the company and shares in the parent operation have reached an all-time high on the Tel Aviv stock exchange on takeover hopes. One of MTI Wireless's investors has been selling shares but this process is now believed to be drawing to a close.