Market falls after 'dead cat bounce'

The London market was back under pressure today as hopes of a sustained recovery for Britain’s blue-chip index failed to materialise.

Banks, telecoms and drugs companies all fell, putting an end to yesterday’s mini-revival when the FTSE 100 Index gained 126 points to correct some of the heavy losses seen last week.

Analysts said the latest decline confirmed that yesterday’s rise was merely a ‘‘dead cat bounce’’ - a City term for a recovery without any foundation.

Williams de Broe head of foreign sales Peter Cogliatti said the same problems as last week remained: ‘‘People did not trust yesterday’s rise and it appears we are still in a for a difficult time.’’

The FTSE 100 Index was down 49.2 points at 4,707.6 by mid-afternoon but experts believe it could eventually fall as low as 4,300 because of continued concerns about corporate earnings and the pace of economic recovery.

US markets, which also surged yesterday as bargain hunters snapped up shares, opened lower today to further knock sentiment.

Even inflation figures showing a 0.5% fall in the underlying rate to 1.8% failed to make an impact in London.

The benign inflation picture raised the possibility that the Bank of England could afford to delay an increase in interest rates.

Despite this, banks slid lower, led by Abbey National which continued to fall in the aftermath of its shock profits warning last week. Shares slid 46.5p to 786.5p.

Technology stocks were also weaker across Europe, and computer services group Logica and telecoms stocks Vodafone and mmO2 were among those lower.