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FTSE 100 pares loss to day's bestafter US data

LONDON: Shares dipped lower before rallying to the day's best level after U.S. economic data broadly matched market expectations, soothing inflationary fears, dealers said.

A top of range 0.5 percent increase in March producer prices (PPI) was offset by a lower than expected 0.1 percent rise ex-food and energy, prompting U.S. Treasuries to rally and shares and gilts to pare earlier losses.

At 1315 GMT the FTSE 100 was down 9.3 points at 3,758.1 after touching 3,745.4 shortly after the day's opening. The June long gilt future was down 9/32 at 105-6/32.

"Once food and energy are taken out the figures looked quite good. People are still positive on the prospects for rate cuts in Europe and the UK and there is a feeling there's more value to be had in the UK market," said one senior trader.

"But at the moment it's the volatility in the bond markets that's making life difficult and until we get some stablisation in that the market will remain nervous," he added.

Overnight falls on Wall Street sparked by inflation worries after yesterday's spike in commodity prices weighed on UK shares from the open. However, dealers were encouraged by underlying resilience in the UK ahead of the U.S. figures.

The PPI figures had been keenly anticipated amid worries that not only were prospects of rate cuts in the U.S. receding but the possibility of an increase were growing.

Also out in the U.S. initial claims for the week ending April 6 totalled 347,00 against forecasts of 379,000.

Today's by-election in Staffordshire South-East which is expected to result in the ruling Conservative party's parliamentary majority being cut to just one is has been largely discounted by markets, strategists said.

The result is expected around midnight.

Among individual movers, Rentokil slipped 17p to 346p, after lifting its bid for BET plc to 2.1 billion stg.

Rentokil said its new offer valued each BET share at 217.4p per share with a cash alternative of 202.5p a share.

AMEC Plc added 4p to 111p, lifted by a positive statement accompanying 1995 results. nL11267377.

House of Fraser slid 13p to 176 after it said it had appointed John Coleman as chief executive of the group. He will assume responsibilities on April 29. nL11280514.-Reuter