Strength of Vodafone masks market indecision

Surprisingly low employment data from the US gave a boost to the UK equity market yesterday.

Footsie shot up almost 100 points after the non-farm payroll figures were released and it closed 46.4 higher at 6,363.5.

The figures were key pointers to the inflationary trend and to the way interest rates may go when the Federal Reserve meets in just over a fortnight.

They were skewed by the government laying off a large group of census-takers, but once those workers were removed from the equation, the underlying growth was still only 138,000. That figure compared with a top-of-the-range forecast of 260,000 growth from Deutsche Bank.

The broker still believes there will be a quarter-point increase in US rates on the 22nd of this month. But there are signs that the house view could be changing.

Strategist Mr Bob Semple said: "My perception is that the market will take the data to suggest the FOMC will not raise rates."

He warned, however, that a benign inflationary climate might not be the motor for recovery that the market is looking for. "You can get a reaction from the market which shows the economy is slowing, but it might also start to prompt earnings downgrades," he said.

In fact, after the initial rush, and taking into account the usual Vodafone-related impact, there was not much to shout about. A rise in the shares of the telecoms group, the UK's biggest company, accounted for about 85 per cent of Footsie's performance yesterday.

Depressed dealers, who have seen trading ranges and opportunities shrink to microscopic levels, were yesterday beginning to feel that the Fed rate meeting might not, after all, be the spark the market needs.

Meanwhile, the chart specialists continued to hold court. Long-time chartist Mr Brian Marber believes there are only two key points on the Footsie to worry about - 5,990 and 6,600 - and until the market breaks decisively through one or the other, there is no way of telling which way it will go.

All the UK's subsidiary indices also ran higher. The MidCap rose 35.7 to 6,715.2, the FTSE All-Share 20.88 to 3,058.06, the SmallCap 9.0 to 3,383.7 and the Techmark 100, helped by a Thursday night bounce on the Nasdaq, 42.97 to 3,475.81.

Volume was just 1.2 billion shares.