Footsie's long road to recovery

CITY watchers fear the FTSE 100 index could be in limbo for the rest of the year due to mounting concern over higher interest rates and the real strength of economic recovery.

Analyst David Buik at spread-bet firm Cantor Index said: 'We are suddenly looking at the after-effects of a dramatic recovery over the last nine months of 2003 which was over-zealous in the extreme.

'There's been no creation of wealth in the UK or Europe at all this year, except from the housing market, and I think the FTSE will bounce around these levels from now until the end of the year.'

Banks bore the brunt of the sell-off in London yesterday with fund manager Amvescap down more than 4%. Long-suffering banks, drugmakers and hi-tech stocks make up 60% of the FTSE 100 by market value.

Yesterday's 4306.3 close is almost 40% below the 6930 reached near the height of the tech bubble in December 1999.

Analysts are now convinced the Bank of England will raise the cost of borrowing by a quarter-point to 4.75% next month in a final bid to deliver a knock-out to the consumer boom on the UK's high streets.

Federal Reserve chairman Alan Greenspan has signalled rates will also rise in the US.

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