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FTSE 100 trims weekly gains to 0.1%, JP Morgan and Bank of America delcine to keep DJIA flat

Published: 13:06 18 Sep 2010 BST

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Following Monday’s rally, which saw the FTSE 100 reach four month highs, the blue chip index slowed down and ended the week with only a marginal gain. The Footsie was little moved in the next three days before surging during Friday’s session on strong US jobless claims data that was released in the previous day. That, however, was short lived as a disappointing update on US consumer confidence prompted investors to switch back to selling mode and putting the blue chips back in the negative.

The University of Michigan said it consumer sentiment index hit 2010 lows, dropping to 66.6 after sliding to 68.9 in August. The substantial decline in consumer confidence is linked to persisting fears of a double dip recession, which have intensified in late summer amid rising jobless claims and declining manufacturing in the US.

Reuters reported that University of Michigan’s director of surveys Richard Curtin has estimated the chance of a double dip at 25%.

In other news reported on this week’s last day of trading, US consumer prices added 0.3% in August after rising by as much in July.

This data came just one day after it was revealed that producer prices climbed 0.4% in August, posting the biggest gain in five months and causing traders to pour more money into gold, which is seen as an inflation hedge.

The yellow metal reached fresh record highs of over US$1,280/.oz late this week.

The late rally was triggered by US employment data from the Labor Department, which said that initial jobless claims surprisingly declined 3,000 to 450,000, while the four week moving average, which is seen as a less volatile estimate, dropped 13,000 to 464,750.

Continuing claims are now at the lowest since 2008 after decreasing by nearly 500,000.

The FTSE 100 rallied 1% in early trade on Friday, while futures for the Dow Jones and S&P 500 indexes in the US added about 0.8%, pointing to a higher start on Wall Street. However, the FTSE 100 ended the session with a 0.6% loss after the employment data was released.

The Dow Jones Industrial Average also slipped into the red, but managed to close with a marginal gain, as did the broader S&P 500 index. The technology heavy NASDAQ composite did better, rising 0.5%.

In the UK, temporary power provider Aggreko (LON:AGK) emerged atop the leaderboard with a 4% gain. Engineering firm Invensys (LON:ISYS) followed, tacking on 3.2%. Retailer Kingfisher (LON:KGF) and fashion house Burberry (LON:BRBY) added just over 2%. Another retailer Sainsbury (LON:SBRY) and copper miner Kazakhmys (LON:KAZ) also made the leaderboard with gains of nearly 2%.

Hedge fund manager Man Group (LON:EMG) was the heaviest faller with a loss of 4.5%. Banking group Barclays (LON:BARC) and pharmaceutical company Shire (LON:SHP) dropped 3%, while Scottish & Southern Energy (LON:SSE), insurer Old Mutual (LON:OML) and commercial property company Segro (LON:SGRO) lost 2%.

In the US, Caterpillar (NYSE:CAT) and United Technologies (NYSE:UTX) were the top performing Dow Jones constituents with gains of 1.6% and 1.45% respectively. JP Morgan Chase (NYSE:JPM) and Bank of America (NYSE:BAC) declined 2.3% and 1.1%.

Equities on both sides of the Atlantic surged on Monday after it was reported that China’s industrial production surged 13.9% year on year in August, inspiring optimism that the economic expansion of the world's second largest energy consumer will continue.

Banks were on the rise on the news that the Basel Committee on Banking Supervision passed new requirements for tier-one capital ratio, giving banks until 2019 to comply.

China's bullish production figures more than offset the negative impact from another update, which showed an increase in the inflation rate to an annualised 3.5% in August from 3.3% in July, reaching the highest level in nearly two years. The inflation was largely driven by a 7.5% rise in food prices due to the widespread floods that hit the country last month.

Other economic data released this week showed a 0.4% increase in US retail sales in August and a gain of 2,300 in UK jobless claims in August. The UK unemployment rate was unchanged at 4.5%.

The FTSE 100 is currently projected to rise 0.3% in Early trade on Monday, while the Dow Jones average is seen flat.

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