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Shares reach another record

Diane Coyle,Economics Editor
Monday 07 October 1996 18:02 EDT
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Shares in London set a new record for the second day running after Wall Street passed an important milestone during morning trading. The Dow Jones index climbed above the 6,000 level for the first time yesterday before profit-taking sent it lower again.

The FTSE 100 index closed nearly 7 points higher at 4,031.5, although down from the day's earlier high of 4,046.8. The Dow Jones index gained 8 points to reach 6,002, boosted by news of a proposed joint venture between Texaco and Shell, before falling back to close at 5,979.8.

However, market nerves about potential clashes at the Conservative Party conference this week took gilts slightly lower. The fact that weaker-than- expected figures yesterday for manufacturing output would take the pressure off Kenneth Clarke, Chancellor of the Exchequer, to raise interest rates before the election did not help pep up the gilts market.

Controversy about the single European currency unsettled gilts investors, and a new political row this week could jeopardise the recent narrowing of the spread between gilts and German government bonds. Hans Tietmeyer, the Bundesbank President, did not help yesterday when he repeated his view that countries which did not join the single currency should be excluded from Target, the planned payments system for euros.

Mr Tietmeyer said: "There cannot and must not be a 'Euro a la carte'." One of Germany's main objections to full participation by non-Emu banks in Target is that this would allow them to create liquidity in euros, which could undermine the price stability policies of the future European central bank.

Market Report, page 26

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