Financial review

The review describes developments in various markets, mainly during the period February to April.

In these three months, there was a marked turn-round in sentiment, and fmancial confldence weakened. This weakening contrasted with the distinct signs of revival which became apparent in the real economy. Concern grew over the difficulties actual and potential facing domestic monetary policy, and, with sterling weakening as the dollar recovered and US interest rates rose, there were widespread fears that interest rates in London would have to rise.

In the latter part of the period, interest rates did rise sharply. The Bank of England's minimum lending rate rose in stages, by 2½% to 9%, in April and early May. Yields rose and turnover dropped in the gilt-edged market, and sales of stock by the authorities in the March quarter were only a little over half what they had been in the previous three months. Sterling's effective exchange rate index stood at 61.4 at the end of April compared with 66.5 at the end of January.

The review concludes with the usual accounts of international banking and the euro-currency markets, oil money movements and the commodity markets.

Financial review