New data lifts the pound and dollar

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The Independent Online
STERLING and the dollar recovered some lost ground yesterday, as figures showed an unexpectedly small rise in US unemployment benefit claims and a fall in the number of British companies going into receivership.

The stock market was lifted by a confident showing on Wall Street and bargain hunting. The FT-SE index of 100 leading company shares closed 25.3 points higher at 2,497.9.

The number of companies going into receivership was 30 per cent lower between April and June than in the previous three months, according to KPMG Peat Marwick, the accounting firm.

A total of 948 receiverships were recorded between April and June, compared with 1,362 in the first quarter. However, the total for the first half of the year was 2,310, compared with 1,976 in the second half of last year.

Tim Hayward, head of corporate recovery at KPMG, warned that the apparently encouraging fall in receiverships had 'to be balanced against the generally bleak outlook that exists in the economy'. He urged a good deal of caution about extrapolating the trend to forecast any immediate economic improvement.

'The recent reduction in the level of receiverships may well be the result of the banks redoubling their efforts to find solutions for clients with difficulties to avoid insolvency. It is, however, too early to say whether the large number of companies that are on banks' 'watch lists' will be capable of being turned around.'

There was cautiously good news on the US economy, with new unemployment benefit claims falling by 4,000 in the week to 27 June, to 416,000. Wall Street had expected a figure of 418,000.

This helped to boost the dollar, which had been under strain early in the day following a report in the Frankfurter Allgemeine Zeitung newspaper that the Bundesbank was considering tightening monetary policy by limiting the amount banks could borrow at its emergency Lombard rate.

The dollar was trading a little above DM1.48 in mid-morning, while the pound dipped below DM2.86. But they recovered when the Bundesbank described the report as speculation and Michel Sapin, the French Finance Minister, said that a tightening in German monetary policy would be 'against our common will'.

The dollar closed 1.3 pfennigs higher in London at DM1.5080 and headed above DM1.51 in New York. But analysts remained nervous of the dollar's future direction. The pound closed a third of a pfennig higher at DM2.8755 and 1.55 cents lower at dollars 1.9055.

Wales and the North-west are the only two regions of Britain to expect the economy to worsen further in the next year, according to an analysis of the last three Gallup consumer confidence surveys by Business Strategies Limited.