Record oil prices encouraged investors to remain on the sidelines today, despite the boost of weaker-than-expected inflation figures in the UK.
The FTSE 100 Index neared a seven-year high on Friday, but sentiment so far this week has been poor after a 1% drop on Monday and a fall of 29.1 points to 6615.4 by mid-morning today.
The Footsie was 48 points lower at one stage, but pulled back after the Government’s preferred measure of inflation remained at 1.8% in September, better than the 1.9% predicted by most analysts.
While the update will increase hopes of a rate cut from the Bank of England, the City remains wary about inflationary pressures after oil prices rose to 87 US dollars a barrel in New York.
Telecoms equipment firm Ericsson added to the downbeat mood when it cut its third quarter earnings forecast, causing its shares to lose around a quarter of their value in Stockholm.
Mobile phone operator Vodafone suffered because of the Ericsson outlook, with its shares down by 1% or 1.4p at 174.9p.
Meanwhile, Northern Rock shares remained volatile as investors digested reports that bidders for the beleaguered mortgage bank may be prepared to leave shareholders with nothing.
Shares dipped 12p to 204.25p during a depressed session for the sector. Barclays fell 17.5p to 609p and Royal Bank of Scotland slipped 17p to 509.5p.
Rising oil prices benefited energy companies, with BP ahead 6.5p at 629p and Royal Dutch Shell up 27p at 2082p. BG Group rose 9.5p to 904.5p, while British Energy was up 7.5p at 572p.
One of the brightest performances of the session came from the FTSE 250 Index after Durex and Scholl firm SSL International delivered a better-than-expected sales update. The stock stood at a five-and-a-half year high after rising 5%, or 25p to 524p.