A blizzard of economic and corporate news left investors in UK equities without a strong sense of direction yesterday.
The economic news was not positive. Average earnings data for February came as a big surprise with the annual rate jumping to 5 per cent, compared with consensus forecasts of 4.5 per cent. A surge in bonuses seems to have been the main culprit.
Further signs of labour market tightness came from the headline unemployment figure which dropped on both the claimant count and the International Labour Organisation measure. The earnings data may limit the scope for further UK rate cuts and there was disappointment yesterday at the failure of the European Central Bank to cut interest rates. But these negative factors were offset by a burst of optimism in the technology sector.
ARM Holdings was the second-best performer in the FTSE 100 as the chip designer made bullish comments about the outlook with its first-quarter results. In the US, Salomon Smith Barney upgraded the semiconductor sector to "outperform". That helped the Nasdaq Composite jump around 80 points in early trade, continuing its recent rally. And while Motorola, the US group reported a bigger-than-expected first-quarter loss, investors took heart from the company's more positive view on the second half of the year.
On Wall Street, in contrast to the Nasdaq, the Dow Jones Industrial Average lost ground in early trading.
All this had the FTSE 100 in a state of flux, trading in a range of 5,766.8-5,841.3. At the close, the blue-chip benchmark had slipped 14.9 to 5,788.1.
The other indices were higher, particularly the Techmark 100, which was encouraged by the ARM announcement. It rose 53.1 to 1,889.5. The FTSE 250 gained 37.2 to 6,146.6 and the SmallCap rose 27.4 to 2,869.8. Turnover was 2.2 billion shares by the 6 p.m. count.
Most analysts remain bullish about UK equities and the UK market is still in favour with international investors. The latest Merrill Lynch survey of global fund managers found that investors were, on balance, overweight UK equities. However, buyers of UK equities still outnumbered sellers by three percentage points.
