ANOTHER set of domestic economic numbers appeared yesterday to give credence to the decision by Mr Kenneth Clarke, Chancellor of the British Exchequer, to cut British interest rates last week. The UK data combined with an unexpected decline in US producer prices to give a boost to the London stock market.
Adding to the much improved market feeling was a report from the British Retail Consortium saying retail sales had risen some 6 per cent in May.
The UK economic news helped the FTSE 100 index rally from an early slide, while the US numbers produced the late impetus for London.
The Footsie ended another session featured by a marked absence of any substantial customer business at the day's high, 3,755.7, up 26.9. Second line stocks were again less impressive, under performing the leaders by a big margin. The FTSE Mid 250 index closed 9.7 ahead at 4,462.3.
There remained, however, a certain amount of scepticism among leading traders about the UK market's ability to stay on the upward path in the face of so many important economic numbers.
The data continue to reveal a mixed economy while UK industrial production showed a 0.8 per cent decline in April, the March figure for manufacturing output was revised upwards. Meanwhile, the BRC survey showed the strength of the consumer sector.
In the US, the weaker than expected producer price news saw Treasury bonds make progress helping to dispel some of the gloomy predictions for US interest rates promoted by last week's worrying non farm payroll report. Gilts were dragged higher by the performance of Treasuries, ending the day around a quarter of a point better and boosting sentiment in equities.
US producer prices dipped 0.1 per cent in May, compared with expectations of a 0.2 per cent rise.
Wall Street's Monday night performance, which saw the Dow Jones Industrial Average rally from an earlier fall of more than 30 points to close only 9 points off, gave a measure of early support to London.
But pockets of profit taking saw the Footsie down 8.5 points at its worst, shortly before the UK output data were made public.
Summing up the day, senior market makers said the big institutions were scared of selling the market in case of a burst of takeover activity.
Turnover at the 6 p.m. count was a paltry 553.7 million shares, and non Footsie stocks accounted for 58 per cent of that figure. Customer business on Monday was a lowly £1.3 billion.
