Market confidence may be short-lived

IN Britain, the FTSE 100 hit a one--month high yesterday buoyed by news in the US that chief executives in the US were standing by their audited accounts.

But the confidence could be short-lived as another key indicator in the US yesterday highlighted continuing weakness in the economy. One more negative sign and the Fed will definitely cut rates on 24 September, said leading economist Niall Dunne of Ulster Bank Markets.

So far in the trawl of US companies the news from the Securities and Exchange Commission has been positive, which helped boost stock markets yesterday, especially in Britain which more than made up the 2.5% loss in value on Tuesday.

More than 700 companies were due to certify their accounts by last Wednesday and in total 947 have been instructed by the Securities and Exchange Commission to endorse their accounts as accurate or else face jail.

By late Wednesday, the SEC announced the bone fides of 477 firms who had endorsed their accounts as being in order. It indicated it had submissions from several other chief executives, which it had yet to assess.

Some market watchers fear that other defaulters will emerge before the full trawl the 947 targeted firms are finally completed by the SEC.

Meanwhile, the FTSE 100 rallied strongly putting on 3.8% on the day more than offsetting the 2.5% loss Wednesday following the poor economic signals out of the US form Fed chairman Alan Greenspan who said the risks to economic growth had heightened. The ISEQ rose 1.6% as it took its direction from its close on Wednesday night and on the surge of activity on New York.

However, news that the Pittsburg Federal Reserve Survey, a local version of the National Purchasing Managers’ Index in the US showed a decline for last month and the Dow shed some of its earlier gains. Having been up by over 1.1% the Dow fell sharply on the back of the Fed figures and was up by just 25 points by late evening.

Today the Consumer Confidence Index, a major barometer of the state of the US economy, is due out. If it shows further weakness, expect market losses to resume over the next few days.