Market Report: BT provides a ring of light amid the gloom

Once again traders had little to cheer in the equity markets as sellers continued to have the upper hand on the back of fears over the weak dollar and over-priced commodities. But there were a few chinks of light in an otherwise depressing day, with BT Group stronger before full-year results due on Thursday.

Some analysts expect the company to announce a better-than-expected improvement in its pension deficit, fuelled in part by rising equity markets and the performance of its pension fund manager, Hermes. Despite the increasingly competitive environment, particularly in the provision of home broadband and the unbundling of the local loop, traders said the current trend was for large corporations to reports results slightly ahead of expectations. Shares in BT were the best performer in a bleak FTSE 100, closing 5.5p firmer at 216p.

Elsewhere in telecoms, buyers reacted to reports that Verizon is poised to offer Vodafone $48bn for the 45 per cent stake in Verizon Wireless owned by the London-listed mobile network operator, pushing the stock 1.5p better to 125.25p. The story has done the rounds several times in recent weeks, with traders expecting Vodafone's chief executive Arun Sarin to accept the offer once it is formally put on the table.

Gainers were few and far between as trading got off to a hectic start, with the market again plunging in early trade. The FTSE 100 was 156.7 lower in the first hour before a mild rally saw the London market close down 70.8 at 5,841.3.

Despite two sessions dominated by sellers and the market's fall below 6,000, many traders and brokers remain bullish. One partner at a stockbroking firm said: "In this market you have to be prepared for big swings but fundamentally London shares are not expensive in comparison to when the dot.com boom collapsed in 2000. There are enough bulls out there who will take this as a buying opportunity."

Xstrata, 202p lower at 2,208p, was the among the biggest fallers in the FTSE 100, following on from a couple of weeks of stellar performance from the mining giant. The copper producers Kazakhmys and Antofagasta were also out of favour as the copper futures price slid almost 9 per cent. Kazakhmys lost 111p to close at 1,204p and Antofagasta shed 169p to 2,273p. The copper miner Vedanta Resources fared even worse, and was the biggest faller in the second liners, ending at 1,495p, a decline of 153p.

Among the stocks staging an afternoon rally were National Grid, 8.5p firmer at 560.5p before results due on Thursday, and Lloyds TSB, 4p better at 510p, as some traders said recent weakness could reignite bid speculation.

In the second-line stocks Enodis, the commercial oven and refrigerator maker, confirmed it has rejected a £782m, or 195p-per-share takeover offer, from its US rival the Middleby Corporation, as it unveiled blockbuster first-half results. Pre-tax profits rose 71 per cent to £24.4m, putting Enodis in a strong position to rebuff Middleby's offer. Shares in Enodis added 24p to close at 199.5p.

The property group Savills was weaker, down 51p at 591p by the close, after a sale order for 60,000 shares went through in pre-market trading at 482p, 160p below Friday's closing price. The rogue trade put pressure on the stock throughout the session, although some traders bought it in the belief that it now looks cheap compared with the high of 730p.

There was a smattering of good news among smaller companies. Victoria Oil & Gas confirmed that prospective reserves at its West Medvezhye project in Russia have hit 1.1 billion barrels of oil and 322 billion cubic feet of gas reserves. The company owns the entire site and initial reaction to the news bucked the gloomy market trend, pushing the shares 26p higher to 263p by midday. But analysts pointed out the reserves are not yet proven, leading to selling pressure and profit-taking, with the shares closing the session 3p lower at 234p.

Chariot, the alternative lottery group, slipped well below its initial public offering price for the first time a week after its first prize draw. The shares have been losing ground steadily since launch, and slipped a further 22.5p to close at 92.5p by the close of trading. The shares have now fallen more than 56 per cent from the high of 213.5p, hit less than two weeks ago.

Finally, traders will be on the lookout for Acertec, as the highly rated manufacturer of engineered steel products for the automotive and construction industry debuts on AIM today. The company has raised £37m through a placing at 148p organised by the broker Collins Stewart Tullett. Traders said the offer was eight times subscribed so, barring another disastrous day on the markets, a positive start is expected.