The UK stock market ended a volatile week in upbeat mood yesterday, despite the twin handicaps of a shaky start on Wall Street and a rise in sterling.
For the second day running, the Dow Jones Industrial Average dipped below the 10,000 mark, although this time the fall came just after the close in London. US gross domestic product figures showed the economy was growing even faster than previously reported in the fourth quarter, and the Federal Reserve has promised to increase interest rates until the economy slows.
But while Wall Street was suffering, the FTSE 100 index was staging a late surge which left the blue-chip benchmark 111.3 points higher on the day at 6,198. The smaller and medium-sized stocks were also stronger, with the FTSE 250 index closing 29.8 points ahead at 6,442.7 and the SmallCap 27.9 up at 3,324.9.
There was little in the domestic environment to encourage investors. A weak euro meant another rise in the pound, with sterling's tradeweighted index jumping to 108.6 from 107.7. And Bank of England governor Eddie George reiterated that the growth of domestic demand still needed to moderate further if a pick-up in inflation is to be avoided.
The UK market has under-performed since the start of the year, partly because of interest rate worries and partly because of technical factors prompted by the Vodafone AirTouch takeover of Mannesmann. Turnover continues to be brisk in the mobile telecoms group, with 339 million shares traded yesterday - the trend appears to be that European investors are selling the stock and UK investors are buying it to get the required weighting.
In its asset allocation report, Deutsche Bank said: "The UK still scores poorly on our scorecard. Although the earnings outlook is unexciting, the main depressants have been liquidity and sentiment, which are at rock-bottom levels. But once the repositioning of portfolios to accommodate the increased weighting of Vodafone has taken place, then one of the big negatives undermining the UK may lift."
Richard Crossley, technical analyst at Teather & Greenwood, said there are signs that some of the bombed-out sectors are recovering. "The sectors that have been most interesting in recent days have been the builders and the brewers, while media stocks have largely met our price objectives."
