BULLS and bears fought themselves to a standstill yesterday, as some strong economic numbers revived concern about inflationary pressures. The FT-SE 100 index closed unchanged at 4,304.3.
Footsie opened strongly in response to another good gain on Wall Street, where the Dow Jones Industrial Average rose 50 points on Tuesday. European markets were also supportive and, after a quarter of an hour, the leading index reached its high for the day of 4,324.3, up 20 points.
A somewhat inaccurate leak about the unemployment data had appeared in a morning paper, but the market nevertheless weakened when the actual figures were announced. The fall in headline unemployment of 67,800 was greater than, most analysts had been expecting, but real concerns focused on the average earnings numbers, where the underlying rate edged up to 4.25 per cent from 4 per cent.
Given that most commodity prices have been subdued, the labour market is the most likely source of inflationary pressures. The government is unlikely to act soon to head off this danger. Few expect a change in interest rates before the election, although they think that base rates will rise after the polls, whichever party is victorious.
The market was able to take some comfort from the Bank of England's quarterly inflation report which indicated that the Bank had softened its stance, arguing for an immediate quarter point rather than a half point rise in rates.
Having reached a low of 4,293.6 in the late morning, Footsie staged a rally, and was given a further kick by another strong start for the Dow which was up 41 points by the London close.
Other markets also reversed direction. Gilts, which were down sharply on the employment data recovered in the afternoon and the benchmark 10 year issue, finished five ticks ahead. Sterling rose above DM2.76 at one point, but dipped back below DM2.75 by the London close.
While Footsie was static the other main indices moved in opposite directions. The FT-SE 250 dropped 12.1 to 4,574.5, while the SmallCap index rose 3.4 to an all time closing high of 2,330.
Mr Ian Williams, UK equity strategist at Panmure Gordon said he was "surprised we have been able to hold on to these levels as long as we have. The next few weeks are going to be pretty tricky as far as, the results season is concerned. It's hard to see where the good news is going to come from.
Mr Tinker, of UBS, had a lovely ride on the back of gilts, which have risen strongly since the end of 1996." Footsie is already close to Mr Tinker's year end target of 4,300, although he said that if gilt yields end the year at 7.5 per cent his target would move up to 4,500.
Volume was 999.2 million shares by the 6 p.m. count, of which just over half was in Footsie stocks. The value of customer business on Tuesday, excluding Crest transacted trades, was £759.6 million.
