The FTSE rises almost five percent in a day - but experts warn that these gains are unlikely to be sustained over the days and weeks to come
The FTSE 100 surged yesterday by almost five percent, despite the release of new data highlighting a manufacturing slowdown in the UK and a warning from the head of the International Monetary Fund (IMF) that the world faced negative economic growth this year.
A statement from the head of Citigroup earlier in the day buoyed investor sentiment, partially explaining the gains. Vikram Pandit suggested that January and February had seen a return to profits for the bank, which has been one of the firms hardest hit by the global credit crunch.
In response, the FTSE 100 closed at 3,715 points, 4.88 percent up on the day. The stock index also extended its gains by a further one percent this morning.
This is despite official government figures showing yesterday that Britain's factory production - a key driver of the nation's economic output - dropped 6.4 percent, the sharpest fall for over four decades. Meanwhile, IMF chief Dominique Strauss-Kahn said that he expected global economic growth would go to "below zero" this year - and US Federal Reserve chairman Ben Bernanke indicated that the current downturn could be the worst since the 1930s.
Moreover, bank analysts indicated that they do not expect the stocks' bounce to be sustained. Speaking to the BBC, Arjuna Mahendran at HSBC Private Bank said: "What you've seen today is mostly a technical bounce in markets after falling steeply recently, and I don't think this rally can be sustained.
"It's still far too early to predict that the global recession is over. The fundamentals are simply not in place."
