Sharp decline in US economy not as bad as feared

US output fell 3.8% in the fourth quarter in the weakest performance in 26 years, but far smaller than the 5.4% consensus forecast as inventory build up mitigated the loss.

The news helped to lift global markets off earlier lows and the Dow is now expected to post modest opening losses.

At 13.46, the FTSE 100 was down only 4.46 points, or 0.11%, at 4,184.65, having been as low as 4,140.38 before the data was released.

But the stock market reaction to the news has been muted by the fact that the fall in output was the largest fall since 1982, that the economy is likely to contract further in the coming quarter and as concerns remain about the logic and effectiveness of the new administration's latest plan to drag the world's largest economy out of the doldrums.