BBC Tuesday, 4 September, 2001, 18:23 GMT 19:23 UK Shares jump on signs of US recovery The latest figures have raised hopes of a recovery in US manufacturing

Shares on Wall Street jumped on Tuesday following signs that the slump in US manufacturing could be easing.

The Dow Jones industrial average rose over 2% after the National Association of Purchasing Management (NAPM) released its latest monthly manufacturing index.

The NAPM index rose to 47.9 in August from 43.6 the previous month - well ahead of forecasts.

On the foreign exchanges the dollar rose to a three week high against the euro, falling below the 89 cents level.

Worst is over?

The latest NAPM figures showed that US manufacturing is still declining, but less sharply than before.

An index above 50 shows growth in manufacturing, while a figure below 50 implies a contraction.

But the jump in the index figure - to 47.9 from 43.6 - was much higher than had been expected, and suggests the rate of contraction is slowing.

The number was also far better than forecasts from analysts, who were expecting a figure nearer the 44 level.

The index for new orders rose to 53.1 from 46.3, showing that orders actually grew in August for the first time in over a year.

Another positive sign it that manufacturers are continuing to clear the backlog of stock which built up as the slowdown hit, clearing the way for new production.

The chairman of the NAPM's business survey committee Norbert Ore was upbeat about the survey's findings.

"I would consider this cause for optimism that the manufacturing sector has seen its worst" he said.

There was more good news for the US economy from the Federal Reserve Bank of Chicago.

Its latest monthly economic survey suggested the risk of the US falling into recession fell last month.

Market reaction

The NAPM figures gave a welcome boost to shares on Wall Street.

The Dow Jones industrial average jumped over a 200 points on the news, and continued to rise.

By lunchtime on Wall Street, the Dow was up 221.35 points to 10,171.10.

The tech-heavy Nasdaq index rose 28.91 points to 1,834.34, while the broader Standard & Poor's 500 Index increased 21.01 points to1,154.59.

"The NAPM shows the economy isn't getting any worse and that was the key people were looking for," said Larry Rice, chief investment officer at Josephthal & Co.

"But I think we're a couple of quarters away from meaningful rebound in Nasdaq" he added.

On the currency markets the dollar rose sharply against the euro.

It broke through the 89 cent level and at lunchtime was trading at 88.58 cents to the euro.

-- Anonymous, September 04, 2001