US data fails to halt FTSE fight-back

Plunging consumer confidence and a record fall in US house prices failed to derail a stock market fight-back from the UK’s biggest companies today.

London’s FTSE 100 Index initially surged to gains of almost 4%, although the gloomy data relating to the US economy meant the Footsie was later 3% higher as its earlier advances were pared back.

Closely-watched consumer confidence data showed sentiment among US shoppers slumping to its lowest point since the Iraq invasion five years ago during March as tighter credit markets, rising prices and falling employment fuelled recession fears.

There was no respite, meanwhile, for the US housing market with prices 11.4% lower in January compared to year earlier – the steepest decline for the Standard & Poor’s/Case-Shiller index since it began more than 20 years ago.

David Stubbs, senior economist at the Royal Institution of Chartered Surveyors (RICS), warned that US house prices could have even further to fall.

He said: “Today’s figures highlight the continuing downward pressure on prices, especially in the cities which saw the largest increases in price during the boom years.

“Any lasting stabilisation in sales activity appears to be at least six months in front of us, if not more.”

Despite the falls on Wall Street, the Footsie clung to most of its early gains led by Britain’s biggest lender, Halifax Bank of Scotland (HBOS).

HBOS saw shares plummet as much as 20% at one stage last week as speculation ran rife over the firm, prompting City watchdogs to launch an inquiry over accusations that traders were profiting from spreading false rumours.

But traders were cheered as the bank’s directors and staff bought £6m (€7.7m) in shares, sending HBOS up more than 13% and delivering an immediate paper profit for chief executive Andy Hornby and his fellow investors.

The wider banking sector enjoyed a strong start to the week after news that investment bank JP Morgan had upped its offer for troubled rival Bear Stearns. Royal Bank of Scotland and Barclays posted gains of more than 8% and 6% respectively.

The funding rescue and cut-price sale of Wall Street’s fifth-biggest investment bank sparked a global share sell-off last week.

The Footsie fell 2.5% in total over a highly volatile four days of trading, which saw central banks worldwide pump money into credit markets to ease the credit crunch.

The US also slashed interest rates by three-quarters of a percentage point to stave off recession.