Stockmarket recovery looks more uncertain

By ELLEN READ and AGENCIES

The tentative recovery by the local stockmarket has become even less certain after some losses on overseas markets.

Anyone trying to gauge the strength of the rise this week would not have been helped by yesterday's moves.

The overseas losses followed a sharp fall in US consumer confidence in July, to its lowest level in five months, undermined by a steep decline in share prices and worries about jobs, a private research group reported yesterday.

The New York-based Conference Board said its Consumer Confidence Index fell to 97.1 from a revised 106.3 in June. Analysts had been expecting a reading of 101.5.

The industry group's index, based on a monthly survey of 5000 US households, is closely watched because consumer confidence drives consumer spending, which accounts for about two-thirds of the nation's economic activity.

From a historical context, the July index is not alarming, but a "continued slide could very well jeopardise the economic recovery," the Conference Board said.

Although the United States broad market rose yesterday as investors nursed hopes that a rebound for stocks was around the corner, blue chips eased after the confidence tumble.

European stocks also skidded as US consumer confidence wobbled.

On the local market, the NZSE-40 index fell slightly yesterday, down 21 points or about 1 per cent.

The White House said it saw some worrisome signs in the US economy, including the drop in the consumer confidence index, but said it believed that US economic fundamentals were solid.

Spokesman Ari Fleischer said the drop might partly reflect the recent US stockmarket's declines and he stressed President George W. Bush's view that other indicators, including economic growth, low unemployment and low inflation, suggested the economy was solid.

"You've seen a variety of economic statistics and data come out, most of it good, some of it not good, much of it recent, in terms of consumer confidence, reflecting the market's drop in the last month or so. So some of that is to be expected as a follow-on to the market.

"There are plenty of signs to look to in the economy to see the strength that the President sees," he added, "but there is no question that there are some worrisome signs, like consumer confidence."