Market closes off highs but up 1.2% on the week

UK shares closed off highs as the Dow failed to hold on to opening gains and traders in the UK – concerned about what September might bring – locked in their positions ahead of the bank holiday weekend.

Joshua Raymond, market strategist at City Index, said: 'There are fears that we could see some consolidation as we enter September when the majority of traders and fund managers return.'

'The key will be fundamentals and whether equities can continue to outperform earnings expectations,' he said.

Initially, the Dow posted gains adding to its eight day winning streak after upbeat updates from Dell and Intel and as investors took mixed data on consumer income and spending in their stride.

Personal income was lower than forecasts and the national savings rate fell as personal spending rose higher than expected in July thanks in part to the boost from the ‘Cash for Clunkers’ scheme that ended in mid-August.  

With reports suggesting US government debt may soar to 100% of GDP, fears rising taxes and rising unemployment could bring the US consumer back down to earth with a bump weighed. After recent sharp gains on the markets, some investors are again wondering whether stock markets have advanced too far ahead of the underlying economic picture. 

By the close of London markets, the DJIA was down 29.78 points, or 0.31%, to 9,550.85 and the S&P 500 was 0.25 points, or 0.02%, lower at 1,030.73.

Back in London, widespread buying pushed the FTSE 100 more than 1.5% higher intra-day after data showed the second quarter GDP decline was slightly smaller than first thought. 

By the close though, the blue chip index was at 4,908.90, up 39.55 points or 0.81%.

The index has risen just under 1.2% since last Friday.