07/08/07 FTSE 100 6189.1, +35.2 Dow 13468.8, +286.9 FTSE 250 10998.8, -187 Nasdaq 2547.33, +36.08 FTSE All Share 3200.15, -23.69 S&P 500 1467.65, +34.6 Nikkei 16921.8, +7.3 Hang Seng 21584.8, -82 Oil (Brent) $71.64 Gold $683.30 Base Rate 5.75% 10 Yr Gilt 5.214% £/$ 2.027 Euro/Gbp 0.6811 Market report  US markets rebounded yesterday as investors took advantage of the steep losses in the financial sector following the concerns about the credit market. Both the Dow and the S&P 500 claimed their biggest percentage gains since 2003 as Wall Street speculated that the Federal Reserve will reassure investors that recent woes in the subprime, credit and housing markets will not slow economic growth. The central bank releases its rate decision on Tuesday, which is wisely expected to remain unchanged at 5.25%, but the focus will be on the accompanying statement for its stance on the stability of credit markets. The Dow Jones surged 286.9 points to close at 13,468.8, the S&P 500 rallied 34.6 points to end at 1,467.65. The Nasdaq jumped 36.08 points to finish at 2,547.33. Bear Stearns were in focus again after the company announced the resignation of its president and chief operating officer Warren Spector. Shares in the company added 5% to close at $113.81. Also in the sector, Wells Fargo gained 5.9% to close at $34.76, Merrill Lynch rose 6.4% to $74.55, Goldman Sachs lifted 4.5% to $187.79 and Citigroup advanced 5.75% to $48.35. American International Group topped the Dow risers board ahead of its quarterly earnings report on Wednesday. Shares in the world's largest insurer climbed 4.7% to close at $64.56. On the Nasdaq, Apple Inc was prominent ahead of an announcement expected this week concerning the new iMAc computers. Shares advanced 2.6% to $135.25. Treasury prices retreated as investors switched back into more risky equities, raising the yield on the 10 year note to 4.73%. US light crude oil slumped $3.42 to $72.06 a barrel, which helped ease investors worries about the effect of higher gasoline prices on consumer spending. COMEX gold for December slipped $1.10 to $683.30 an ounce. The Nikkei finished almost unchanged, gaining just 7.3 points to close at 16,921.8. Commodity related shares were lower after the drop in the price of crude oil, Inpex Holdings and Mitsubishi Corp paced declines. Mizuho Financial Group Inc reversed a gain and Nomura Holdings trimmed its advance having made good headway earlier in the session following the buoyant mood in the US. Treand Micro Corp and Japan Steel Works Ltd surged after reporting higher profits. Toyota Motor Corp rose after the Nikkei newspaper reported it may increase production. The Hang Seng also struggles for direction, and is currently 15.8 points lower at 21,920.9. HSBC Holdings rose on speculation the US government will take steps to contain subprime mortgage losses in the world's largest economy. Cathay Pacific Airways Ltd led airlines higher on expectations jet fuel costs fall along with prices of crude. In contrast, Cnooc Ltd - China's biggest offshore oil producer - declined. Blue chips endured another choppy day on the London market yesterday as high-profile takeover activity failed to lift stocks into positive territory. The FTSE 100 Index closed down 35.2 points at 6189.1, losing earlier gains as credit concerns across the Atlantic overshadowed trading despite a positive opening on Wall Street. Akzo Nobel's higher 670p-a-share proposed offer for Dulux paint maker ICI and hopes of merger and acquisitions in the insurance sector had helped the benchmark index gain advances earlier in the day. ICI shares rose 3p to 634.5p after the chemicals giant confirmed it had opened its books to Dutch rival Akzo following the revised approach, worth just over £8bn. Insurers Standard Life and Friends Provident also made gains as the market speculated over which firms were planning to gatecrash Friend's agreed merger with Resolution. Standard Life, which is reported to be planning a bid for Resolution, saw shares leap 9.25p to 315p, placing the group at the head of the risers board. International Power followed the life and pensions group in the list of share risers, gaining more than 2%, or 9.5p, to 435.5p after the firm boosted its portfolio of wind turbines. Broker upgrades also came into play as a positive assessment on the television advertising market from Merrill Lynch helped boost broadcaster ITV ahead of its interims later this week. Shares closed up 2.5p at 104.3p. But elsewhere in the media sector, Daily Mirror publisher Trinity Mirror suffered reverse fortunes on the back of a broker downgrade, off nearly 5%, or 22.25p at 474.75p. Lehman Brothers cited last week's disappointing news that Trinity's sale proceeds were to come in short of expectations. Falling gold and copper prices saw miners suffer losses, with Lonmin top of the share fallers ranking, off 156p at 3085p. BHP Billiton was also down 41p at 1333p, followed by Kazakhmys down 36p at 1194p, Anglo American down 74p at 2685p and Rio Tinto falling 88p to 3219p. Anglo-US fund management group Invesco fell victim to the persistent fears over US sub-prime mortgage default rates, off 3%, or 19p at 585p, largely as a result of fears over its exposure to the US high risk loan market. The concerns also spread to investment firm Man Group, sending the firm 19p lower to 524p. Economic report  US Non farm productivity (Q2, prelim) 13.30 bst Q2 non farm business output rose by 4.2 percent. A 2.2 percent percent rise is expected in hours worked( private payroll hours worked rose 2.3 percent), implying a 2 percent increase in productivity. Year on year productivity should rise to 1.2 percent from 1 percent. Compensation per hour should rise 3.5 percent, which suggests a 1.5 percent increase in unit labour costs. On a year on year basis, unit labour costs would rise to 3.3 percent from 2.2 percent. US FOMC rate announcement (Aug) 19.15 bst The FOMC is expected to leave rates unchanged at 5.25 percent. The statement may acknowledge the recent decline in stocks and the widening of corporate spreads, either explicitly or through a general comment on financial market conditions. At the October 1998 meeting (when the Fed followed up the September LTCM induced intra-meeting cut with an additional rate cut), the statement mentioned "growing caution from lenders and unsettled conditions in financial markets". The FOMC might use some softer but similar language this time around. Economic growth should still be characterised as "moderate" in the first half of the year, as well as for the outlook in coming quarter. On the inflation front, even though the FOMC might point out that recent benchmark revisions boosted core PCE inflation a bit, the statement could still say that core inflation readings, "have improved modestly in recent months", given decent monthly results since March. Meanwhile, given the financial market turmoil, the odds have risen that the FOMC could shift its upside inflation bias to a more neutral or double sided risk assessment. US Consumer credit (20.00 bst) Consumer credit continues to increase at a steady pace. Assuming a USD 6BN IN June, consumer credit outstanding rose by USD 21.2bn (USD85bn annualised) in Q2, down from an increase of 27.4bn (USD 110bn annualised) in Q1. The details published in this e-mail are intended for information only and should not be construed as advice under the Financial Services and Markets Act 2000. 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