US pessimism halts FTSE 100 climb

The dizzy climb of the stock market over the past week or so came to an abrupt halt yesterday, hit by a wave of pessimism from across the Atlantic. Statistics showing that the British consumer's appetite for borrowing continues unabated did nothing to boost sentiment.

A record increase in personal lending of pounds 1.43bn in June was seen as boosting the chances of a further rise in interest rates when the Bank of England's Monetary Policy Committee meets early next month.

Equity investors rode a roller-coaster ride yesterday. After coming within an ace of the psychologically crucial 5,000 barrier, squeezed higher by the expiry of July index options, the FTSE 100 index went into negative territory after Wall Street opened. The Dow slumped 145 points at one stage, dragging the Footsie down by just over 100 points at 4,848.3 by mid-afternoon. The index ended 71.8 lower on the day at 4,877.2.

Microsoft was the main cause of the decline, reporting less than its usual sparkling figures after the US market closed on Thursday. Traders were less worried by strong UK borrowing and monetary figures.

The British Bankers' Association, the trade group for the main clearing banks, said a four-year high in mortgage lending was behind the new record rise in personal borrowing, which was just above the unparallelled pounds 1.41bn rise notched up in May. The BBA said the property figures were likely to have boosted by attempts to beat the expected rise in stamp duty in the Budget earlier this month. But the signs were that the housing market remained strong, a spokesman said.

Separately, the Bank of England released statistics showing that growth in M4, the broad measure of money in the economy, had edged up from an annual rate of 11.3 per cent in May to 11.6 per cent last month. David Bloom of brokers James Capel, suggested that monetary growth was likely to become increasingly important in setting interest rates.