Category Investments

London last week

10 February 2004 Quentin Smith

The publication of survey data pointing to accelerating growth across all sectors of the domestic economy helped London shares to end the week ahead, says Quentin Smith of OMAM UK.

This, despite dollar weakness, a less optimistic international picture and some disappointing corporate results.

The market took Thursday's widely anticipated interest rate rise in its stride.

The Bank of England raised its benchmark interest rate by a quarter point, citing a broader-based global and domestic economic recovery.

It commented that domestic output growth was above trend in the second half of 2003 and that recent surveys point to a further pick-up in the first quarter, while household spending and borrowing have been resilient and the housing market remains strong.

The Bank believes that this is likely to lead to a gradual pick-up in inflationary pressure during the next two years.

Fund manager Amvescap (+2.0% to 4111/4p) reported a fourth quarter profit of £3.8m after costs from the US investigation of improper mutual fund trading, against a £41m loss a year earlier.

The company set aside £16.1m for legal expenses as it negotiates a settlement with regulators. Amvescap, which derives 80% of its profit from the US, is one of more than 20 companies under investigation for allowing trading that diluted returns for long-term investors.

Regulators have alleged that the company's Invesco Funds group in Denver engaged in a scheme whereby privileged clients were allowed to trade in and out of the company's funds to make quick gains.

The Bank of England inflation report is published this week, which should give some clue as to the possible timing of the next rate rise, while in the US, Fed chairman Greenspan's congressional testimony is likely to paint a rosier picture of the economy, with growth broadening out.

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