A WORRYINGLY strong set of producer price data from the US and a sharp upwards revision of retail sales data for previous months prompted a sudden reversal in sentiment in global stock markets yesterday, and London was no exception.
The US data - showing core prices up 0.4 per cent, compared with consensus forecasts of a 0.1 per cent increase - triggered an immediate sell off in US Treasury bonds and stocks, which, spilled into British gilts and equities.
Dealers said the figures alerted markets to the increased potential for a further rise in US interest rates, possibly as early as the next Federal Reserve Open Market Committee meeting, scheduled for May 20th.
US markets have wobbled considerably recently amid fears of another 25 basis points rise in US rates. Also, there was alarm after US retail sales for February were revised upwards to 1.5 per cent.
Equity strategists emphasised that the London market's setback was not domestically orientated. "The market's concerns are international, and specifically US driven," said Mr Corey Miller of Credit Lyonnais Laing. He also pointed out that sterling's move above 2.80 deutschmarks "suggests the British general election is a secondary issue to international investors".
Before Wall Street's retreat London enjoyed a morning of good gains, mostly in the utilities but also across other sectors with marketmakers noting more topping up of weightings by fund managers.
