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London stocks close

modestly lower

LONDON: Shares gave a cautious response to Friday's surge to record highs with trading remaining muted and range-bound in a lacklustre start to the week, dealers said.

The FTSE 100 finished with a decline of 4.4 points from its all-time peak to 3,852.7.

Second-line stocks, however, continued to scale new heights, with the FTSE-250 hitting its ninth consecutive high of 4,544.1, a rise of 9.6 points on the day.

"With no follow-through on the buy-side, market-makers took the opportunity to get the market lower this morning but it's encouraging the market's proved so resilient," said one trader.

"Everbody was trying to keep it nice and even. Nobody's really happy to take big bets against the market. Quite a few people got their fingers burnt last week," said another.

But underlying sentiment remained good across the market, supported by on-going bid speculation, dealers said.

As widely expected, National Power fuelled market hopes for further takeover activity after announcing a 2.5 billion stg agreed bid for Southern Electric.

The move is seen as an attempt by the UK electricity generator to fend off an unwanted takeover approach from Southern Co of the U.S.

Wall Street provided only short-lived impetus to the London market in early afternoon as expectations of good quarterly results, news of the merger of Bell Atlantic Corp and NYNEX Corp and stronger bonds combined to boost U.S. shares at the start.

The FTSE 100 briefly reclaimed positive territory before easing back to drift sideways at slightly lower levels throughout the afternoon.

At London's close, the Dow was up 32.51 points at 5,567.99.

UK M4 data made little impact on share prices despite dampening hopes of a near-term UK rate cut, dealers and economists said.

Among other individual movers, Associated British Foods rose 9p to 420 after news first-half profits beat expectations and analysts prepared to upgrade forecasts. nL22137832.

Eurotunnel fell 4-1/2p to 69p after the Anglo-French tunnel operator reported a net loss of 924.9 million stg for 1995. Analysts had been expecting a loss of up to 900 million stg. nL22126969

Carlton Communications slipped 11-1/2p to 458p following a press that a forthcoming book by analyst Terry Smith criticises its accounting practices.

"Rate cuts are on the back burner after these figures. I don't see rates going up before the next election but the scope for cutting rates has been greatly reduced," said David Coleman, chief economist at CIBC.

"It will be tricky for the Chancellor (of the Exchequer Kenneth Clarke) to justify a cut," he added.

June gilts dipped slightly after news March provisional UK M4 money supply rose by a seasonally adjusted 10.1 percent year-on-year, while bank and building society lending data increased by 5.9 billion stg.-Reuter