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London : Mobashar says we're treading water

Index heavyweight Vodafone ended steady at 203 pence. Telecom equipment maker Marconi lost 5.60 %, falling ahead of annual results next week.

BT's woes would rebound on Marconi if the heavy indebted telecoms operator decided to get tough on supply costs. Building materials firm Hanson stood out among the minority of FTSE gainers, rising 5 % as investors switched into more defensive stocks and expected to gain from lower UK interest rates.

Speciality drug firm Shire also moved against the general trend, rising 3.50 % to extend gains after the clearance of its merger with Biochem Pharma. Aero engine maker Rolls Royce added 3.10 % after announcing a $ 100 million ten year maintenance deal with South African Airlines, which Rolls Royce said would help the airline in its fleet expansion plans.

The FTSE 250 index of mid cap stocks closed 15.70 % lower at 6504.90, while the FTSE Techmark index was down 38 points or 1.90 % at 2006.70. Mobashar Ahmed, Chief Analyst for futuresdata.net, said the market had settled back to waiting for further clues on the US economy following this year's series of steep interest rate cuts.

"Investors are asking will the interest rate medicine work and what will that mean for corporate profitability going forward?" Mr Ahmed said. "Without answer to these questions, we are treading water - there's little sector leadership in the market as a while, so a degree of caution is understandable," concluded Mr Ahmed.

London lower

London's leading shares closed lower on Tuesday, after an indecisive session as investors switched out of technology, media and telecoms (TMT) shares and headed into banking stocks.

Britain's FTSE100 ended down 31.00 points or 0.50 % at 5840.30 heading back towards its session low of 5824.30 late in the day, as Wall Street gave up some of its earlier gains. Winners and losers were evenly matched, while volume was steady - 1.70 billion shares traded.

"We are seeing investors pushing into one area one day and the next day coming out and going into something like defensives," said Mobashar Ahmed, Chief Analyst for futuresdata.net, "It is this constant switching at the moment that the market is really uncertain about which direction it wants to go in," he continued.

Banks offered some upside, helped up by a 2.40 % rise from Standard Chartered, which was buoyed by some positive sentiment in the Financial Times, which highlighted the bank's exposure to recovering emerging markets. Several defensive stocks were also in upbeat mood.

Food retailer Tesco and Safeway both added more than one percent while utilities Lattice Group and International Power ended up more than 2.50 %.

However, those gains were outweighed by weaker telecoms. Vodafone group led the sector lower, falling 2.80 % as it continued a steady retreat from this month's surge above 231 pence - its highest level since February. Telewest Communications and Colt Telecom Group followed suit with weaker finishes, although British Telecommunications bucked the trend by ending up 1.40 %.

Media stocks also weighed, with news and information firm Reuters Group among the top FTSE 100 losers with a drop of 6.70 % after reporting what the investors considered a cautious outlook, despite a rise in first quarter revenues.

Mobashar Ahmed said the quarterly results were towards the high end of expectations, but the forecast of slower growth in the current quarter raised concerns among investors about earnings. Rounding off the trio of weak TMTs, technology stocks once again succumbed to some more disappointing news from across the Atlantic as US fibre optic components giant JDS Uniphase announced third quarter losses and job cuts.

UK fibre optic firm Bookham Technology dropped 4 %, ahead of its first quarter results on Wednesday, while software firms were also depressed. Logics and Saga Group both fell about 7.50 %. The tech mark index of tech shares finished down 34.52 points or 180 % at 1929.00.