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Last Updated: Sunday, 9 November, 2003, 11:55 GMT
US rebound spurs market hopes
By Myles Neligan
BBC News Online business reporter

stock market trader
The US economy has lifted investor optimism

The outlook for the UK stock market has brightened after unexpectedly strong jobs figures last week suggested that the US economic recovery is gathering pace.

Investors have also taken heart from the FTSE 100's sanguine reaction to last week's quarter point rise in UK interest rates.

The FTSE closed 1.2% higher on Friday at 4,377, bringing it within striking distance of levels it has not reached in 15 months.

The rally came after official figures showed that the US economy created 126,000 new jobs in October, stirring hopes that a steady stream of lay-offs over the last two years is coming to an end.

The positive jobs data followed figures out last week showing that the US economy grew at an annual rate of 7.2% - its highest level in 19 years - in the third quarter.

Analysts said the resilient US economy, together with expectations of solid corporate results in the fourth quarter, will enable global stock markets to continue building on their recent gains.

Dow 10,000

"This is a US-led recovery," said Martin Evans, head of global research at E-Trade Securities.

"One is inevitably looking for reasons to be cautious, but the economic indicators point to a strong revival in the US. The Dow will sail through 10,000, and will take the FTSE higher."

But there is still a degree of uncertainty over the longer-term outlook.

Analysts at Lehman Brothers predict slower US growth in the months ahead, arguing that since consumer spending remained strong throughout the downturn, there will be little pent-up demand to drive the economy forward next year.

This week, British investors will be looking for October retail sales data, due on Monday, for clues as to how the UK economy is faring.

They will also be scrutinising the Bank of England's quarterly inflation report, due on Wednesday, for hints on how interest rates are likely to move in the months ahead.

On Thursday, German third quarter economic growth figures are expected to show that the eurozone's largest economy has emerged from recession, after contracting in the first and second quarters.

On the corporate front, BA and magazine publisher Emap will be turning in their half-year results, while cleaning products manufacturer Reckitt Benckiser will be reporting results for the third quarter.

Analysts at Barclays Private Clients expect BA's earnings before interest and taxes to fall to 160m from 248m in the same period last year, and expect profit growth in the 'mid-high double digits' for Reckitt.


FTSE 100
22.84 0.42%
18.55 0.32%
Cac 40
14.37 0.38%
Dow Jones
78.53 0.76%
35.31 1.58%
Data delayed by at least 15 minutes

US growth in the spotlight
26 Oct 03  |  Business
US earnings take centre stage
19 Oct 03  |  Business

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