Markets steady after resignations

Mr O'Neill's resignation did not shake the market

Markets across the world slipped momentarily on news that both the US Treasury Secretary Paul O'Neill and White House economic adviser Larry Lindsey had resigned.

But the indexes regained composure as analysts suggested the departures came as little shock and could even be good news for the economy.

The announcement of Mr O'Neill's resignation came minutes before trading opened on the New York Stock Exchange.

The initial reaction was a sharp sell-off on world stock markets, but shares recovered quickly as the news was digested.

Much of the initial slide, dealers said, was down to unexpectedly poor US unemployment figures which had been announced an hour earlier.

Unsurprising

By the close of trade the US Dow Jones share index was up 22.49 points, or 0.26%, at 8,645.77, while the UK's FTSE 100 closed down 18.9 points, or 0.47%, at 4,013.5.

Analysts on both sides of the Atlantic suggested the resignation of the treasury secretary was being interpreted positively.

We had been counting on much stronger job growth to sustain US consumer spending

Sal Guatieri, Bank of Montreal

Bill Strazzullo, a market strategist at State Street Global Markets, said: "I think the resignations are a good thing for the economy.

" I don't think the market had much faith in O'Neill."

Instead, analysts said the initial dip in stock markets was the rise in the unemployment rate to 6%.

Sal Guatieri, an economist at the Bank of Montreal, said: "We had been counting on much stronger job growth to sustain US consumer spending going forward, given that debt loads are increasing.

"The continued weakness in labour markets will certainly raise a downside risk to the outlook for US consumer spending in coming months."

Going public

Mr O'Neill was a market favourite during his years at the top of US industry, most recently as chairman and chief executive officer of Alcoa.

But his two-year tenure in the Treasury was marked with blunt speaking which often failed to take into account the sensitivity of markets to official statements.

He was particularly prone to comments about the strength of the US dollar, insisting that politicians should stay out of the way of market forces - a stance he also applied to scandals such as that involving Enron.

With his departure, the Bush administration could feel more freedom to massage the dollar lower, so as to improve the competitiveness of American exports.