Asian recovery helps leading shares defy poor economic data at home

The London stock market defied some poor domestic economic data for the second day running and moved higher thanks to a positive international background.

Figures on average earnings - the data which provoked this month's interest rate rise from the Bank of England's monetary policy committee - showed a further acceleration in wage pressure. The annual rate in March moved up to 5.2 per cent, from February's 4.9 per cent; even that figure does not reflect the strength of the private sector, where earnings are growing at 5.9 per cent.

Although the official unemployment figure rose marginally, and unexpectedly, indicating that the employment market might be starting to come off the boil, the data seemed certain to alarm the monetary policy committee.

Short sterling futures, the market's vehicle for speculating on interest rate changes, fell again, giving a clear indication that the market expects another rise in interest rates. And the benchmark 10-year gilt dropped by a point for the second day running.

Some analysts continue to argue that the figures are distorted. "We do not worry unduly about the rise in earnings as it is powered entirely by bonuses," said Mr Simon Briscoe, UK economist at Nikko Europe.

"Bonuses, in contrast to higher settlements, are discretionary and non-inflationary in the vast majority of cases," he said. "In addition, the fact that earnings are rising strongly in some sectors which are experiencing low growth rates suggests that factors other than economic strength, such as productivity deals and compensation for reduced profit-related pay are forcing earnings up."

But the stock market's sang froid in the face of the figures was mainly the result of overseas news. Asian markets had rallied even before the heavy intervention in the currency markets to support the yen by the Bank of Japan and the US Federal Reserve.

The intervention, which succeeded in driving up the yen to Y137 to the dollar at one point, relieved fears that further Japanese currency weakness would trigger a round of devaluations in Asia, notably in China and Hong Kong.

The Frankfurt and Paris markets rebounded by around 2 per cent and, on Wall Street, the Dow Jones Industrial Average was 200 points ahead by the London close.

The international blue chips in the FTSE 100 index were carried higher by this wave of enthusiasm, finishing 103 points higher at 5,832.7. The announcement of a share buy-back by mining group Billiton made it the best performer.

But it was significant that the FTSE 250 index, more heavily weighted towards domestic industrial stocks, had another depressing day.