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Stock markets March ended with fears of a prolonged war in Iraq and disappointing economic news from the United States driving stock markets sharply down on both sides of the Atlantic, the FTSE 100 closing 95.2 points lower at 3,613.3 on 31 March. Share prices recovered strongly as coalition forces closed on Baghdad sparked hopes of a quick end to the war in Iraq, and the FTSE 100 leapt 121.4 to 3935.8 on 7 April, close to the year’s opening level of 3,940.4, as almost 3 billion shares changed hands on one of the busiest trading days of the year so far. This was followed by a fall of 7.4 points to 3,861.4 in response to the Budget on 9 April, but by the end of the month had recovered to a level of 3,926.0, having gained 8.7% during April, its biggest monthly rise since September 1997. Oil The price of oil rose strongly at the beginning of the month as it emerged that Iraq had halted its illicit supply of crude to Syria, which the country had used in its domestic refineries to export more of its own production. A strike in Nigeria also helped to push the price to a high of $27.18 a barrel before hopes of a swift end to the war and minimal damage to Iraq's oil fields prompted a slip to a four-month low on 7 April. Opec's announcement on 24 April of a cut in oil production by 2m barrels a day failed to stem the continuing decline in price following the cessation of hostilities, as Brent crude slumped below $24 a barrel, but Opec indicated that there could be a further cut in June to counter the impact of continued sluggishness of the world economy and the effect of the SARS virus on demand for oil. Exchange rates Speculation that Tony Blair has not given up hope of joining the single currency saw the pound slid by almost 0.5p to 69.49p against the euro on 22 April, its lowest level since February 1999. Interest rates The Bank of England left the cost of borrowing unchanged at 3.75% despite calls from industry leaders for action to stave off further job cuts in the manufacturing sector. UK economy The preliminary estimate from the Office for National Statistics shows growth of 0.2% in the first quarter, half the 0.4% achieved in the fourth quarter of last year and lower than the 0.3% predicted by economists. Nevertheless, the economy has now grown for 43 successive quarters, and the year-on-year growth rate of 2.3% is the highest since the first quarter of 2001. US economy The US economy grew at an annual rate of 1.6% in the first quarter, well below economists’ predictions of 2.4%. Germany The German government has cut its growth forecasts from 1% to 0.75%, the second cut in three months, prompting business leaders to warn of a severe confidence crisis as tax rises and a 20% surge in the euro since the beginning of the year have taken a heavy toll. Japan Tokyo’s Nikkei index slid to a 20-year low of 7,699.50 with fears that exports are being hit and travel plans cancelled because of the SARS crisis in Asia. Trade deficit British exports fell sharply in February to £21.8 billion, a drop of £1 billion on the previous month as the world economy almost ground to a halt before the Iraq war, according to the Office for National Statistics. The total trade deficit on goods and services was a worse-than-expected £2.4 billion. House prices Prices rose by 4.4% during the first three months of 2003, according to the Halifax, equivalent to an annualised rate of 19%. Britain’s biggest mortgage lender expects house price growth to slow further during 2003, ending the year 9% higher. House prices were up by 1.1% for March, compared with increases of 1.8% in February and 1.5% in January. The increase puts annual house price inflation at 23.4%, with the average home now costing £127,040. Mortgage borrowing According to the Council of Mortgage Lenders, first-time buyers accounted for just 30% of all mortgages arranged in the first quarter of 2003, 10% lower than in the same period last year. As prices continue to rise by 26% a year according to the Halifax, low wage increases are forcing buyers to raise ever-larger deposits and seek loans worth ever-higher multiples of their salaries. Many first-time buyers are entering the workplace with substantial debt from university, and fears surrounding the economy and the property market are also prompting new buyers to delay purchases. Retail sales The Office for National Statistics reported that retail sales volume was up 0.6% compared with February, and up 4.3% on a seasonally adjusted annual basis. Inflation Figures from the Office for National Statistics showed the underlying rate of inflation remaining at 3% in March, and it has now been above the Government's 2.5% target for five consecutive months. Headline inflation, which includes mortgage interest payments, fell by percentage points to 3.1%, largely due to declining housing costs. |