Upbeat forecast powers FTSE to new high
Wednesday 28 April 1999
Telecom and technology stocks led the market's charge, with the FTSE 100 index breaking through the 6,600 barrier to set a new intra-day high of 6,635.9. Profit-taking took the FTSE lower in the late afternoon, although the index still managed to set a new record close of 6,593.6, up 90 points.
Monday's record close for the Nasdaq, the US high-technology index, helped push UK technology shares higher. Meanwhile, telecom companies were given a lift by Monday's pounds 2.8bn acquisition of a US Internet switching company by the UK company GEC.
A strong set of results from telecoms group AT&T helped take the Dow Jones index into record territory by lunchtime.
New evidence from the Confederation of British Industry (CBI) of an unexpectedly large jump in business confidence added to the bullish sentiment on the UK stock market.
The CBI said that manufacturing confidence jumped from minus 40 per cent in January to minus 6 per cent in April, its highest level since early last year. The UK should now escape recession by a "hair's breadth", according to the CBI, which is shortly expected to revise upwards its growth forecast.
Despite signs of increasing confidence, Andrew Buxton, chairman of the CBI economic affairs committee, urged the Bank of England to shave another 0.25 points from interest rates in order to underpin the recovery. The CBI said the overall state of the UK economy remained fragile, particularly in manufacturing, which had been shedding jobs at the fastest rate in six years.
In the first four months of 1999, 52 per cent of manufacturers cut jobs, while only 10 per cent created jobs. This gives a net balance of minus 42 per cent, the lowest figure reported since January 1993. Manufacturing prices continued to fall sharply, with unit costs falling at the fastest rate ever recorded.
Separate figures from the the Office for National Statistics revealed that the UK's global trade deficit on goods narrowed by pounds 120m in February to pounds 2.6bn.
Preliminary figures for March showed an improvement in the deficit with countries outside the EU, with the goods deficit narrowing to a smaller- than-expected pounds 986m.
But although the global deficit narrowed in February, the deficit on goods traded within the EU widened to a nine-year high of pounds 1bn.
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