Money supply surge dims hope on German rates

GROWTH in M3, the key measure of Germany's money supply, accelerated again in April, the Bundesbank said yesterday, sending Frankfurt share prices spiralling down amid pessimism about short-term interest rates.

Gilts prices fell in London ahead of today's auction of convertible government bonds - 7 per cent gilts due 1997, convertible into 9 per cent stock due 2012. Commodity prices were relatively subdued, with the US Commodity Research Bureau's price index falling slightly from Monday's three-and-a-half-year high.

The April German money supply data showed that M3, the broad measure of cash and bank deposits, had grown at an annualised rate of 15.8 per cent since the last quarter of 1993, way above the Bundesbank's target maximum of 6 per cent.

This exacerbated the bearish sentiment already encouraged by comments from Hans Tietmeyer, the Bundesbank president, that the central bank had used all room for key rate cuts for the next few months.

The DAX index fell through the important 2,200 mark, diving 50.93 points to close at 2,198.72. Major blue chips suffered as investors were unsettled by the disappointing M3 figure.