Stock markets were cheered by the news that consumer confidence has jumped this month - the reverse of its reaction to last week's optimistic assessment of the economy from the Fed chairman, Alan Greenspan. Analysts said yesterday that better prospects for profits outweighed fears that another interest rate cut would be postponed.
Mr Greenspan's comment a week ago that the maximum danger of recession had passed took share prices sharply lower. But by midday yesterday the Dow Jones index was up 23 points at 4692, while the dollar had risen above DM1.39.
Federal Reserve Board Governor Lawrence Lindsey confirmed the Fed's outlook yesterday. "I think we are in for a period of slower but still sustained growth, and I think that's liable to go on for quite a while still," he said.
Consumer confidence bounded up much more than expected in this month's national survey by the Conference Board. The index rose to 99.9 from 94.6 in June, and the Conference Board said confidence was reassuringly strong. Robert Brusca, chief economist at Nikko Securities, said: "The consumer is telling you that deep in his gut - moving around the economy in his day-to-day way - he finds that things are getting better."
Additional evidence of a consumer revival came with separate figures showing a 6.5 per cent increase in sales of existing homes last month. The number of homes sold rose to 3.78 million, up from 3.55 million in May, although still nearly 6 per cent lower than in June last year. Falling mortgage rates have helped the housing market. The average was 7.53 per cent in June, compared with 8.43 per cent a year earlier.