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Equities show mixed sentiment

LONDON: UK shares ended a relatively quiet session little changed as fears of a sell-off following Wall Street's sharp decline on Monday failed to materialise. Market sentiment was underpinned by hopes for a near-term British interest rate cut, dealers said.

"Unlike the U.S., there is no case for Europeans to put their rates up. We will probably get a German cut next week and the UK will follow with a cut by next month," one senior dealer said.

The FTSE 100 index closed 3.0 higher at 3,758.6 after an earlier low of 3,726.2. Trading volume was light as many institutional investors waited to see how Wall Street performed this week.

"People are waiting for Wall Street to settle down. While they wait for the smoke to clear, volumes are bound to suffer," another trader said.

The Dow, which dropped 88 points on Monday jumped over 20 points higher in the opening minutes of trade on Tuesday before the expected upward spurt ran out of steam.

The key 30-share U.S. index was down just 7.95 points to 5,586.42 by 1530 GMT, helping to calm earlier market worries about another possible Dow sell-off. Trading volume was light as many institutional investors waited to see how Wall Street performed this week.

"People are waiting for Wall Street to settle down. While they wait for the smoke to clear, volumes are bound to suffer," another trader said.

The Dow, which dropped 88 points on Monday jumped over 20 points higher in the opening minutes of trade on Tuesday before the expected upward spurt ran out of steam.

The key 30-share U.S. index was down just 7.95 points to 5,586.42 by 1530 GMT, helping to calm earlier market worries about another possible Dow sell-off. "The Dow could still have a meltdown, but it doesn't look likely just yet," one dealer said. "People keep trying to knock Wall Street lower and it turns around a few weeks later and sets new highs," he added.

Speculation that UK Chancellor of the Exchequer Kenneth Clarke will sanction at least one more British rate cut intensified following today's weaker-than-expected UK industrial production figures.

UK February industrial production rose 0.4 percent, less than the 0.7 percent forecast, while manufacturing output was flat -- again lower than the 0.2 percent increase anticipated. "This should sustain expectations that there is still room for another reduction in interest rates as overall economic growth remains fairly soft," said Bank of America's economist Rob Hayward.

Dealers said Clarke, under pressure from his ruling Conservative party to cut base rates before the next UK general election could cut by 25 basis points as early next month.

"Some people think (UK Prime Minister John) Major will call an election in October. Clarke is going to have to move quickly on rate cuts for them to have any impact on voters by then," one dealer said. "This should sustain expectations that there is still room for another reduction in interest rates as overall economic growth remains fairly soft," said Bank of America's economist Rob Hayward.

Dealers said Clarke, under pressure from his ruling Conservative party to cut base rates before the next UK general election could cut by 25 basis points as early next month.

"Some people think (UK Prime Minister John) Major will call an election in October. Clarke is going to have to move quickly on rate cuts for them to have any impact on voters by then," one dealer said. Technical analysts expect the FTSE to remain in a narrow trading range over the near-term, with strong support seen at 3,716-3,720 and resistance at 3,790-3,800.

With no major corporates reporting results, there were few individual share features.

Grand Metropolitan rose 8p to 414p and Guinness 2-1/2p to 460p, on positive comments in the Financial Times newspaper's Lex column. nL09102095

Talk of a stock shortage and a "bear closing' pushed British Gas 4-1/2p higher to 239p.-Reuter