US fears fail to trouble City

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The Independent Online

City Editor

Shares in London shrugged off Monday's heavy falls in New York, with the FT-SE 100 index reversing early losses to close 3.0 points higher last night. That resilience put paid to fears that Wall Street's nerves would spill over onto European bourses and the American market itself held firm when it opened yesterday afternoon.

London was given a boost by a sluggish British manufacturing report which confirmed the continuing weakness of economic growth and rekindled hopes that interest rates could still have further to fall. British manufacturing output was unchanged in February and rose just 0.4 per cent from a year earlier. Industrial output, which includes utilities and mines, rose 0.4 per cent in February and 1.2 per cent year on year.

Attention had focused on the equity market because stronger than expected US payroll figures last Friday served as a worrying reminder that the American economy was growing probably too fast to allow any further cuts in US rates. Wall Street fell 88 points on Monday, after a 130 point morning fall that looked dangerously like a re-run of the 170 point slump a month ago following bumper February employment figures.

News of an additional 140,000 non-farm jobs created in March - double the 70,000 consensus estimate - and a smaller than expected downward revision of the huge 705,000 February payroll increase to 624,000 confirmed the American economy was growing at a healthy pace.

The gilt market in London was harder hit with the yield on the benchmark 10-year government bond, an indicator of future interest rate expectations, rising 8 basis points to 8.11 per cent. In the US, the 30-year treasury bond ended a five-day slide.