Footsie gallops to record high

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The Independent Online
Shares on Wall Street could not sustain their latest dramatic surge yesterday. But their gain the previous day, along with a further slide in sterling's exchange rate, helped shares in London set a record.

The FTSE 100 index climbed by nearly 14 points to close at 4,341. Across the Atlantic, investors took advantage of the Dow Jones index bursting through the 7,000 barrier on Thursday to take profits yesterday, despite new figures signalling the absence of immediate inflationary pressures in the American economy. The index was 29 points lower at 6,992 in closing trade. The Dow's gain of more than 1,000 points in only four months reflects investors' optimism about the strength of the US economy, although some experts remain fearful that share prices could fall sharply from their giddy heights. Just two months ago Alan Greenspan, chairman of the Federal Reserve, warned about the "irrational exuberance" of the financial markets.

A batch of statistics yesterday showed an unexpected fall in prices charged by manufacturers in January, along with flat industrial production and unchanged consumer confidence. The general picture was one of steady growth putting no pressure on the Federal Reserve to increase interest rates in the near future. Jonathan Basile, an economist at HSBC Markets in New York, described the figures as "Fed-friendly".

Marilyn Schaja, an economist at Donaldson, Lufkin and Jenrette, said: "The economy is slowing down from the torrid pace of the fourth quarter."

The harsh winter explained the absence of any increase in industrial output last month. Snow and storms led to a fall in hours worked in manufacturing and mining.

Energy output rose sharply, also thanks to the weather, and output of business equipment - mainly computers and trucks - built up speed. Analysts said the total production figure was likely to rebound in February. Even with the wintry slowdown, manufacturing output last month was 5.1 per cent higher than a year earlier.

Yet the continuing recovery in industry has not yet fed through into higher prices at the factory gate.

Separate figures showed that these fell by 0.3 per cent last month, their first decline since October 1994.

Lower oil prices accounted for the unexpectedly good news, and should feed into producer prices for the next few months.

Separately, the University of Michigan's index of consumer sentiment was unchanged between January and February.