Footsie rebound as bears retreat

Nick Goodway12 April 2012

STOCK market bears were forced to retreat into their caves briefly today as the London stock market at one point recovered half the massive losses it recorded on Wednesday.

The FTSE 100 index of leading shares rose by 78.5 points to 4471.1 in early trading, making up half of last night's 154-points fall which dragged the index down to its lowest closing level since 28 April 1997 just before Tony Blair's Labour Government came to power.

But dealers reported that share trading volumes were very thin and the FTSE 100 slipped to stand only 77.0 points higher at 4469.6 with little real evidence that investors were committing themselves to buying the market.

Sentiment was boosted by a late rally on Wall Street triggered by a swift rise in technology stocks. The Dow Jones Industrial Average clambered up 47.22 points to close at 9054.97. American markets are closed for the Independence Day holiday today giving little guidance to European stock markets for another 24 hours. Investors also remained cautious ahead of today's decisions on interest rates by the Bank of England's monetary policy committee and the European Central Bank. Neither was expected to raise rates.

The MPC's decision at noon was eagerly awaited. The committee, headed by Bank Governor Sir Edward George, has seen little data to convince it that the British economy is overheating, with the notable exception of house prices. Today's figures from the Halifax showed house prices continued to soar, rising by 19.3% over the past year.

But house prices are only one of the categories of movements in asset values which the MPC studies. It also keeps a close eye on share prices. Its preferred measure is the 15-day moving average of the FTSE All-Share index, which covers 720 stocks. This has fallen by 10% since the previous meeting of the committee last month. That may help to balance the rise in house prices and allow the Bank to keep base rate at its current 4%.

The ECB decision was expected around lunchtime and any change in the current 3.25% rate across the Continent would come as a major surprise. The pound rose more than a quarter of a cent against the US dollar to 1.5257. It also strengthened against the euro, to 63.96p, compared with 64.25p last night.

These jitters could last for years

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