The dollar was boosted on the foreign exchanges by rumours that George Soros was buying the US currency against the Japanese yen.
The Commerce Department said the US economy had grown at a rate equivalent to 3.8 per cent in the second quarter of the year, fractionally higher than its earlier estimate. But the growth figure was smaller than the 4.1 per cent expected by Wall Street economists, relieving fears of another rise in US interest rates.
The New York Stock Exchange had to halt computer-led buying of shares as the Dow Jones Industrial Average surged more than 50 points higher by lunchtime. It closed 51.16 points higher, at 3,881.05.
Wall Street's enthusiasm spilled over to London, where a fall of nearly 16 points in the FT-SE index of 100 leading London shares was more than reversed. London closed with a 30.9-point gain on the day at 3,265.1. The 100 index has risen 420 points in the past two months.
The benchmark 30-year US Treasury bond rose on the growth figures, pulling the yield below 7.5 per cent. The dollar pushed up through the 100 yen barrier, but trading was relatively light.
In London the dollar closed 1.35 pfennigs higher against the German mark at DM1.5620 and half a yen higher at Y100.25. The pound lost a cent and a quarter to end the day at dollars 1.5405.
Matthew Alexy, a US Treasury market analyst, said the unexpectedly small revision 'suggests some cooling of what had been considered a white-hot rate of growth'.
The revision to the growth figure largely reflected a dollars 2.3bn upward revision of the value of companies' stocks of unsold goods. Stocks are now estimated to have risen by dollars 56.3bn, the largest increase since the winter of 1987. The US economy grew at a rate of 3.3 per cent a year in the first quarter and an annualised 6.3 per cent in the last quarter of 1993.
The Commerce Department stuck by its earlier estimate that the implicit price deflator - the broadest measure of prices in the economy - rose 2.9 per cent, unchanged from the first quarter. The Labor Department added that the price of America's imports rose by 1.1 per cent in July, following a revised increase of 0.8 per cent in the previous month. Export prices rose by 0.3 per cent, having been stable in June.
Separate figures showed that US company profits rose by 7.4 per cent in the second quarter to dollars 547.3bn, after adjusting for normal seasonal changes. The University of Michigan consumer confidence index rose from 89 in July to 91.7 in August, with expectations and assessments of current conditions improving.
The markets will now be waiting for next week's monthly employment and jobless figures, as well as the US purchasing managers' index.Reuse content