Traders hold out for rate cut

Strong performances from oil companies BP and Shell and a late cameo from BT were just enough to push leading shares higher yesterday.

But while the final reading may have showed the FTSE 100 index 12.8 points ahead at 6,269.2, there was no hiding from the fact that the market remained in a fragile state.

Once again, institutions were reluctant to take any decisions, preferring to wait on the sidelines ahead of this week's deluge of corporate results, and more importantly, the Bank of England meeting.

Most economists expect the Bank's monetary policy committee to cut rates by 25 basis points this week. If it does, this would be the first cut since September 1999. But doubts persist. Domestic demand remains very strong, and the MPC may decide against moving before the Budget in March.

Market turnover was weak, reaching just 1.7bn shares, leaving traders who had battled to work through the Tube strike wondering why they had bothered.

Elsewhere, the FTSE Techmark 100 index fell back 26.03 points to 2,706.19, dragged down by the Nasdaq, which failed to rally after a mauling on Friday, and a switch into defensive stocks ahead of today's results from networking company Cisco.

If the figures from Cisco come up short - and given recent negative comments from chief executive John Chambers they could - sector watchers expect a rough ride for technology stocks.

A sharp spike in the crude price at the back of end last week - the price of Brent rose almost $3 on Thursday and Friday as traders rushed to cover short positions - supported both BP, 11p better at 598p and Shell, 17p stronger 574p. But traders said both stocks could move lower today.

After the markets' close Saudi Arabia's oil minister said no further Opec productions cuts were needed to support the oil price.

Market gossip that the flotation of Orange, the mobile phone company controlled by France Télécom, will prove a success helped BT progress 28p to 729p. BT is planing to float its wireless unit in the second half of the year to help cut its debt.

Marks & Spencer, off 2p to 238p, gave back some of Friday's gains as analysts delivered their verdict of the company's "arrangement" with fashion guru George Davies. Although there were some positive voices - Schroder Salomon Smith Barney upgraded its rating - the sceptics triumphed. Deutsche Bank reckons that there is still no evidence that the business has stabilised.

In the meantime, a ruling in north America helped ScottishPower produce a gain of 16.5p to 480p. The Utah public service commission, which fixes retail power prices in the state, is going to allow ScottishPower to charge its customers 9.5% more for their electricity to compensate for rising power costs.

Industrial gases group BOC, off 35p to 990p, was hit by selling pressure ahead of today's first quarter results, which are unexpected to make unpleasant reading. According to reports circulating the Square Mile yesterday, BOC's earnings growth in the first quarter is likely to be only half that analysts had expected.

With the exception of Sema - up 54p to 449p after confirming takeover approaches - it was a pretty lacklustre affair lower down the corporate ladder. The FTSE Mid 250 index closed 10.7 points lower at 6,746.8.

That said, Arena Leisure, the racecourse owner, advanced 16.5p to 104.5p on hopes its Go Racing consortium will shortly secure the rights to broadcast British horse racing.

Insurance broker Jardine Lloyd Thompson perked up, rising 12.5p to 442.5p on the back of reports that Willis, the privately owned broker, is considering a merger.

On the Alternative Investment Market Carbo, the metal grinding tools maker, was a strong performer, adding 1.5p to 10p on news that Peter Gyllenhammar, the active Swedish value investor, has built a 3.65% stake.