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UK EQUITY MARKET INSIGHTS FROM AMP

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On Friday the FT-SE 100 Index closed at a new 1995 peak, reaching a high for the session of 3114.6. The index gaine...
On Friday the FT-SE 100 Index closed at a new 1995 peak, reaching a high for the session of 3114.6. The index gained just over 50 points, or 1.6% in the week. The broader market also remained very firm. The FT-SE Mid-250 Index closed at 3,454.1, a gain of 13.1 points on the day and nearly 64 points on the week.

The UK equity market is reacting positively to the performance of bond markets, which now believe that the US economy is beginning to slow, and that past fears about inflation were too pessimistic.

Equities are also benefiting from a generation of cash by the corporate sector, which is being distributed through dividend growth and acquisitions. (Take-over speculation is strong in the utilities and also in the food sector).

Finally the UK's shrinking Public Sector Borrowing Requirement has reduced the supply of gilts onto the financial market leaving funds available for equity investment.

However, FT-SE performance could be damaged by the wealth of UK economic data released this week. Producer prices released yesterday have already proved to be rising faster than expected, and with retail prices released tomorrow the market's growing perception that inflationary pressures are diminishing may have been misplaced.

Results due this week:

UK oil/chemicals sector 1994 final quarter results are led this week by British Petroleum today.

The impact of mild weather on gas sales and refining margins, is likely to have been offset by the strength of the upturn in the chemicals sector, and BP is expected to report sharply improved earnings.

The chemicals upturn reflects economic recovery and shortages of some products. BP also benefited from the recent surge in petrochemical prices.

Reuters, the international financial information and news group also reports today, and 1994 profits are expected to be 15% higher.

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