Waiting for the Fed's word

If the big question confronting the London market this week is how big an interest rate cut will be made at tomorrow's US Federal Reserve meeting, then the other big question is what to do in the interim.

With the Fed not scheduled to reveal its decision until after the close of play in London time, traders are expecting a couple more sessions like yesterday's mind numbing affair.

It was very predictable stuff. The rate sensitive banking sector was chased higher as investors anticipated a reduction of at least 25 basis points from the Fed.

Tech stocks followed the fortunes of the Nasdaq composite index in New York and the recent outperformers were hit by profit-taking.

The upshot of it all was that the FTSE 100 index ended the day 22.7 points higher at 6,317 - a seven-week closing high - thanks to strength in compa nies such as Barclays, 67p better at £22.44, and Abbey National, 19p stronger at £12.29p.

A good showing from the telecommunications heavyweight, BT - up 23p to 692p after admitting it might demerge its Yellow Pages division, Yell - also helped the cause.

Meanwhile, the FTSE Techmark 100 ended the day in much the same position as the Nasdaq composite shortly after the start of business in New York - that is, little changed, up just 2.67 points to 2,782.93.

Market turnover was pitiful, just topping 1.5bn by 6.15pm - compared to post-Christmas volumes of over 2bn. Traders said the City's big institutions were refusing to commit fresh money to the market ahead of the Fed meeting.

Psion was one of the day's biggest losers, falling 51p, or 9.32%, to 213p after the US electronics group Motorola pulled the plug on a product development deal.

The FTSE 100's wooden spoon went to mining group Billiton, which lost 15.75p to 289.75p after stockbroker Merrill Lynch advised clients to take some "quick profits" following what it called recent "strong outperformance".

Before yesterday's decline, Billiton had risen 18% since the start of the year. A downgrade from ING Charterhouse left Lattice 6p weaker at 134p. Citing concerns about gas regulator Ofgem's forthcoming review, ING lowered its investment rating on the gas network operator to "reduce" from "hold".

Ofgem's next price review consultation paper is due out at the end of February, and traders expect it to contain details of an alternative approach to setting Transco's regulatory asset value. Put simply, Transco's regulatory asset value is the figure that dictates how much money Lattice can make and a reduced rate, which will mean lower profits for Lattice, is said to be under consideration.

Jitters ahead of tomorrow's full-year figures got the better of chip designer ARM Holdings, down 18p to 515p, while engineering group GKN slid 22p to 821p, unsettled by unconfirmed reports that its highly rated chief executive CK Chow might step down as part of its restructuring plan.

On the speculative front things were pretty quiet.

A few brave punters decided to short telecoms group Thus, off 4p to 62p, ahead of its third quarter figures today, while others were having a nibble at Alliance & Leicester, up 14p to 714p, on the back of reports that National Australia Bank is casting its eye over the mortgage bank.

Elsewhere, drinks group Allied Domecq ended 19p stronger at 421p after confounding the sceptics with an upbeat trading statement.

Among second line companies, holders of shares in frozen food retailer Iceland, 12p weaker at 192.5p, had to endure more pain.

Its new chief executive, Bill Grimsey, is expected to deliver a report on the integration of cash and carry group Booker tomorrow, and many feel it will make grim reading.

Fears are growing that the £20m of benefits promised at the time of the deal last year are taking longer than expected to come through.

On AIM, hi-tech fund Eurovestech ended 0.5p higher at 23.5p after announcing solid interim figures.