The chancellor's decision on Tuesday to remove tax credits on share buy-backs and special dividends associated with takeover bids also contributed to reduced market sentiment in the latter part of the week. It is probable that the Inland Revenue timed the announcement to stop Reuters, the media and information group, from proceeding with an innovative £613m payback deal to shareholders.
The share buy-backs and special dividends schemes, used by companies to give capital back to shareholders and sweeten acquisitions, have become widely used in recent years, particularly in the banking and utilities sectors. However, after an initial fall in the FTSE 100 index, the market recovered reflecting the fact that this action was widely anticipated. Government action was also less tough than it could have been - special dividends not linked to takeovers will still attract the tax credit.
There is plenty of economic data due this week to keep the market's attention, with investor's likely to be particularly interested in wage inflation data following last week's disappointing news on underling retail price inflation, which crept up from 2.8% to 2.9%.