Concerns that China may move to slow its surging economy in order to combat inflation saw markets in the US and UK fluctuate yesterday.
Wall Street’s Dow Jones Industrial Average was down 0.5 per cent, as speculation mounted that the Chinese government might raise interest rates.
In London, mining stocks – which rely heavily on Chinese demand – weighed on the FTSE 100 Index, which stood just four points higher at 5819.6.
Investors were also disappointed by the lack of firm action from G20 leaders in South Korea, although countries were at least able to pledge that they would avoid the “competitive devaluation” of currencies.
Traders’ confidence was lifted by a move by EU ministers to calm bond market jitters over a possible bailout of Ireland. Their comments addressed concerns that private investors would have to bear a share of the burden in future bailouts of countries in fiscal crisis.
The fears that Ireland might soon be forced to follow Greece in turning to international financial support have plagued the London market all week. Yesterday, the spread on Irish bond yields narrowed after earlier reaching record highs.
Royal Bank of Scotland, which has been hit by worries over its exposure to Ireland’s debt crisis, rallied 1.2p to 42.3p.
Other risers included Rolls-Royce after it appeared to identify the cause of the engine failure that forced a Qantas A380 superjumbo into an emergency landing last week.
It revealed that a component in the turbine of the engine sparked an oil fire and led to the release of another part – a turbine disc.
Rolls said the event will have an impact on financial results this year, but investors were relieved at signs of progress in the Qantas inquiry as shares in the under-pressure company improved 29.5p to 613.5p.
Utility stocks were also higher after British Gas owner Centrica became the latest firm to increase prices for domestic electricity and gas customers.
Faced by a 25 per cent hike in wholesale costs in the last year, Centrica will increase its tariffs by seven per cent on average from next month. Shares were 6.8p higher at 342.8p, while Scottish & Southern Energy added 25.8p to 1168p, Severn Trent lifted 19p to 1455p and United Utilities improved 5.5p to 630p.
Elsewhere in London, the pressure on mining stocks caused by fears of Beijing rate hikes meant Kazakhmys fell 29p to 1522p, Antofagasta dropped 17p to 1455p and Lonmin dipped 30p to 1759p.
Outside the top flight, shares in model railway firm Hornby rose 5.9p to 153.9p as it offset a drop in half-year profits by saying it was well-placed for Christmas trading.