LONDON (AFP) - Leading British shares shed early gains after disappointing numbers from investment bank Morgan Stanley triggered sharp falls on Wall Street.
At the close of trade on Wednesday, the FTSE 100 index was 16.1 points lower at 4,592.3, and well below the morning peak of 4,630.7.
Volumes were strong with 3.237 shares changing hands in 207,386 deals, swollen by strong trade in Shell, Vodafone and Corus.
On Wall Street, the Dow Jones Industrial Average was off 111.50 points at 10,133.40, while the Nasdaq composite index lost 26.86 points at 1,894.32.
US investors were spooked by weaker-than-expected results from Morgan Stanley, and also by strong oil prices after industry data showed supply remained constrained.
The American Petroleum Institute said crude inventories for the week ending September 17 fell by 12.9 million barrels to 266.7 million.
"The market was expecting the worst and got it," Infinity Brokerage Services' head analyst John Person said Wednesday.
Despite the oil price gain, the major corporate news in London was a disappointing strategy presentation from Shell, with the Anglo-Dutch oil giant's stock losing 14-1/2 pence at 418.
Shell said it is targeting capital expenditure of around 45 billion dollars in 2004-2006, and is planning divestments with a total value of 10-12 billion.
Dealers were disappointment that the group still needs to see an oil price of 28 dollars per barrel after divestments to break even.
Other blue chips that performed badly, included Man Group which topped the FTSE 100 fallers after its shares lost 4.97 percent of their value.
Shares in the hedge fund-manager shed 66 pence at 1,261 after Morgan Stanley cut its recommendation on the stock to 'equal-weight' from 'overweight'.
Broker comment also hurt ICI, with the stock four pence lower at 209-1/2 after CSFB warned that the shares are not worth the risk.
ITV was another loser, down 0-1/2 at 109-3/4 as the group's decision to sell its entire 5.5 percent stake in Thomson for 162 million pounds failed to impress investors.
Media group Reuters was the second worst-performing stock on the FTSE 100, after its shares lost 3.37 percent of their value to close at 330 pence.
Mobile telecom heavyweight Vodafone rose 0-3/4 pence to 131 on the back of upbeat broker comment ahead of next week's investor meeting.
Both Goldman and JP Morgan reiterated their 'outperform' rating on Vodafone, helping to offset news of a delay in the wireless provider's 3G launch.
Vodafone's rival mmO2 meanwhile added 0-3/4 pence at 95-3/4.
Shares in Compass topped the FTSE leaders board, up 7-3/4 pence to 232-1/2 -- or 3.45 percent -- as dealers highlighted ongoing hopes of a takeover bid for the struggling catering group.
Elsewhere, strong full-year numbers pushed shares in Smiths Group up 5-1/2 pence to 730.
The aerospace group flagged an improved performance in the current year as the aviation industry's recovery helped boost new orders.
And Wolseley was the second best performing stock on the FTSE 100 after its shares jumped 22-1/2 pence higher to 919 -- a 2.51 percent increase -- on the back of a target price upgrade by UBS ahead of full-year results on September 27.
UBS said Wolseley's full-year figures should show very good progress both in terms of results and growth/strategic trends.
Vodafone finished as the most popular share among traders, with 298 million shares changing hands.
Shell meanwhile saw 115 million shares being exchanged, making it the second most traded stock on the FTSE 100.