The US stock market gained ground strongly late yesterday, with investors initially judging that the report from the independent counsel, Mr Kenneth Starr on US President Bill Clinton contained few surprises. The Dow Jones index ended a turbulent week up 179.96 points at 7795.60, a gain of 2.36 per cent on the day.
Earlier share prices on international markets stabilised in thin trading, as lower-than-expected producer price figures in the US tended to balance out the uncertainty generated by the pressure on President Clinton in the build up to the publication of the Starr report.
On the American market, which had fallen heavily on Thursday on the political uncertainty generated by the report, shares initially opened weakly with the Dow falling by more than 100 points. But then the Dow was boosted by a variety of factors - including August producer prices figures which were well below market expectations and which have increased the prospect of an interest rates cut when the US Federal Reserve's Open Markets Committee meets on September 29th.
Producer prices fell 0.4 per cent in August and are down 0.8 per cent over the past 12 months. Economists had been expecting a month-on-month fall of 0.1 per cent and one analyst said: "This eliminates any potential hurdle the Fed might have been able to point to for a reason not to ease. It increases the probability of an ease on September 29th."
The US markets were also boosted by positive trading statements by technology giants Intel and Oracle, which boosted the technology-heavy Nasdaq index. Finally, the perceived absence of any further charges against President Clinton in the report, beyond those already in the public domain, led to strong gains on the market, with the broadly-based Nasdaq index gaining 3.55 per cent. An easing of the tension in Latin America also contributed to the better tone on Wall Street. In a surprise move, Brazil's central bank raised the nation's interbank rate from 29 per cent to 49.75 per cent in response to the flight of capital which saw the Sao Paolo Bovespa stock index fall 16 per cent overnight. Last night, the Bovespa was trading over 13 per cent higher while Buenos Aires's Merval index - which had also fallen heavily overnight - was over 6.7 per cent higher.
Stocks on European markets fell heavily in early trading, succumbing overnight to the Clinton jitters, with London, Paris, Frankfurt and Dublin all falling by as much as 3 per cent. But the bounce on Wall Street saw the bigger European markets recover most of those early losses, although the Irish market closed over 2 per cent lower. Dealers in Dublin believe, however, that the Irish market should rebound on Monday after Wall Street's recovery.
The early falls in Europe came in a chain reaction which began in New York overnight. Sentiment was further hit by huge losses late on Thursday in the fragile Brazilian and Mexican stock markets and the massive 5 per cent overnight fall in Japan.
