FTSE loses bulk of previous day's gains

Investors found little cause for optimism today as the FTSE 100 Index shed much of the previous session’s 90 point rally.

Renewed terrorism worries and a gloomy inflation report from the Bank of England did little for confidence on the London market.

With Wall Street sharing the pessimism, the Footsie closed 53.1 points lower at 3616.1.

Only a handful of stocks finished in positive territory with insurers and financial stocks among those trading lower.

The tone for the session was set the previous night by US Federal Reserve chairman Alan Greenspan after he said that geopolitical tensions had acted as a barrier to the resumption of vigorous economic activity.

This was confirmed by the Bank of England in its quarterly inflation report, which said growth was expected to be weaker than it forecast in November.

The report also helped explain last week’s shock interest rate cut, when the Bank reduced the cost of borrowing to a 47-year low.

Insurers, which had a good day yesterday, were among those to slip back. Legal & General was off 3.5p at 71.75p, Royal & Sun Alliance, which today announced it was outsourcing processing and administration for its UK Life operation to Unisys, fell 4p to 91.25p, while Friends Provident was down 1.5p at 96.25p.

Fund managers and banks were also under pressure. Barclays was 11.25p lower at 342p, although HBOS bucked the trend, edging up 8p to 589p and HBOS rose 5p to 655.5p.

Fund manager Amvescap tumbled 22.75p to 296p, while South African financial services group Old Mutual was 1.25p lower at 86.5p.

British Airways was lower as soldiers and armed police patrolled London’s Heathrow airport amid fears of a terrorist attack. The shares lost 5.25p to 112.75p, while BAA, which owns Heathrow was down 14.5p at 436p.

Other fallers included chocolate and fizzy drinks group Cadbury Schweppes, which was 6% lower, down 20p at 315p, after cautioning profits at its US soft drinks arm, Dr Pepper/Seven Up, were unlikely to exceed 2002’s level.

The shares slide came despite the group reporting a 6% rise in profits for the last year.

And drugs giant GlaxoSmithKline was off 22p at 1115p, as traders gave its results a lukewarm response at lunchtime.

The group reported a 6% increase in full-year profits despite the “challenging environment” but the market was also looking for reassurance about potential growth from its drugs pipeline.

There was also weakness in the retail sector with electrical outlet Dixons down 6.25p at 93.75p and Comet owner Kingfisher 10.5p at lower at 195p.

Telecom stocks at least managed to hold firm during a bleak session. Former BT subsidiary mmO2 rose 0.25p to 48.75p, while Vodafone was unchanged at 115.75p after it announced plans to mop up the remaining 22% stake it doesn’t already own in Dutch subsidiary Libertel.

The biggest Footsie risers were Hanson up 9.75p at 284.5p, Compass Group ahead 6.25p at 300p, HBOS up 8p at 589p and Alliance UniChem ahead 3.25p at 410.25p.

The biggest fallers were Amvescap down 22.75p at 296p, Dixons off 6.25p at 93.75p, Capita Group down 12.75p at 195p and Cadbury Schweppes off 20p at 315p.