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FTSE 100 ends down

LONDON: UK shares closed lower as the market digested Japan's moves yesterday to ease overseas investment restrictions and after unexpected strength in the latest weekly US jobs data, dealers said.

"There have to be questions about what impact, if any, this "wall of money" from Japan will have on the market," said one.

"We've seen shares take a bit of a breather today and there is some anxiety about UK interest rates but nevertheless we could well challenge 3,520 over the next week or so," he said.

The FTSE 100 closing high of 3520.3 was set February 2 1994.

Blue chips closed 24.3 points lower at 3,475.6.

Stronger than expected US employment figures for the week to July 29 compounded early market weakness as consolidation after Wednesday's 50 point-rise kept UK shares in negative territory.

Gilts slid in line with US Treasuries as jobless claims touched just 321,000 against forecasts of 371,000, dragging index futures and the UK cash market lower.

The figures were seen putting the focus even more sharply on tomorrow's US employment data for July due out at 1230 GMT.

While dealers said the news of Japan's plans to facilitate investment overseas, aimed at lowering the yen, provided a trigger for pent-up demand, some questioned the market's ability to push ahead.

Many strategists saw on Wednesday's gains as broadly sustainable on fundamentals, but were cautious as to how much farther it could take UK shares in the near term.

However, ongoing bid talk served to underpin current market levels, they said.

High levels of cash by institutions together with receipts from recent bids and the possibilty of more to come from future deals was also likely to prevent heavy selling, he said.

Today's US jobless data saw Wall Street fall on the open but lower-than-expected US June factory orders helped the Dow climb off its worst and re-ignited speculation about rate cuts.

But the strong jobless data had worried markets ahead of tomorrow's July employment data, said market commentators.

U.S factory orders for June fell 0.2 percent against forecasts for orders to be unchanged from the previous month.

At London's close the Dow was down 15.14 points at 4,675.01.

Shell eased 15p to 759 as analysts digested second quarter results. A downgrade of several major oil stocks, including Shell, by Lehman Brothers added to pressure on the shares.

Zeneca slid 22p to 1,098 after half year figures hit consensus targets but fell short of the most optimistic forecasts. London Electricity gained 15p to 789 amid continued speculation about possible bids by foreign utilities.

Guardian Royal Exchange was also helped by higher than forecast half year figures. The shares rose 6p to 224.

Wessex Water gained 17p to 353 amid market talk of a planned takeover by Waste Management International. Waste Management declined to comment on the rumours.

Elsewhere in the sector, shares rose on positive comments from Credit Lyonnais Laing and the ongoing takeover talk.-Reuter