U.K. TRADE FIGURES BUOY HOPES OF INTEREST RATE CUT

  The release of U.K. February trade data
  showing that the current account surplus was a provisional 376
  mln stg, up from a 73 mln surplus in January, has boosted hopes
  of an early cut in interest rates, analysts said.
      Market forecasts had been for a worse outcome, with
  expectations of a deficit in visible trade averaging about 750
  mln stg, against the official figure of 224 mln stg, sharply
  narrower than January's 527 mln deficit.
      "The figures are unreservedly good," Chase Manhattan
  Securities economist Andrew Wroblewski said.
      Sterling rebounded on the trade figures, reversing a weaker
  morning trend, to stand at 72.1 pct of its trade weighted index
  against a basket of currencies at midday, unchanged from
  yesterday's close but 0.3 points above the 1100 GMT level.
      The market had feared that a deteriorating non-oil trade
  pattern would undermine international support for sterling,
  which has been the motor behind the recent fall in U.K.
  Interest rates. Money market sources said the market had begun
  to doubt that a widely expected drop in bank base lending rates
  to 9.5 pct from the present 10.0 pct was really on the cards.
      But sentiment now looks to have turned about again.
      There now looks to be no danger that the Chancellor of the
  Exchequer Nigel Lawson's forecast of a 1987 current account
  deficit of 2.5 billion stg will be exceeded, said Wroblewski.
      Seasonally adjusted figures showed that imports rose in
  February to 7.16 billion stg from 6.73 billion in January.
      Exports rose to a record 6.93 billion from 6.20 billion.
      However, Chris Tinker, U.K. Analyst at brokers Phillips and
  Drew said that the faster rise in exports than imports would
  prove partly aberrational in coming months. He forecast the
  Chancellor's Budget tax cuts would increase consumer expediture
  on imported goods.
      However, Ian Harwood, economist at Warburg Securities, said
  his firm was sharply revising its 1987 current account deficit
  forecast in the light of the latest data, cutting one billion
  stg off the expected full year total to about 1.75 billion stg.
      He said news of strong growth in exports of non-oil goods
  confirmed recent bullish surveys among members of the
  Confederation of British Industry.
      The growth in imports appears to be flattening, even if
  January's bad weather had curbed consumer spending on overseas
  goods and import-intensive stock building among manufactureres,
  Harwood said.
      U.K. Government bonds, or gilts, surged by more than 1/2
  point on the better-than-expected news, as earlier worries
  about the figures evaporated.
      Sterling peaked at a high of 1.6075 dlrs, before settling
  to a steady 1.6050 dlrs about 1300 GMT, nearly a cent higher
  than the European low of 1.5960.
      However, analysts noted that the turnabout in market
  sentiment still looks highly vulnerable to political news.
      Morning weakness in sterling and the gilt market was
  largely attributed to a newspaper opinion poll showing that the
  Conservative government's support was slipping.
      The Marplan poll, published in "Today," showed Conservative
  support had fallen to 36 pct, from 38 pct last month, while the
  Alliance of Liberals and Social Democrats had rallied to 31
  pct, from 21 pct, to run neck and neck with the Labour Party,
  whose own support fell from 38 pct.
      The poll was taken after the Budget, which was greeted
  enthusiastically by financial markets but seems to have left
  the voters indifferent, political observers said.
      Another regular poll is due tomorrow, and eonomists warn
  that today's improved sentiment could be dented if support for
  Prime Minister Margaret Thatcher slips again.
      This upsetting of the markets' political perceptions, which
  are all but discounting a Conservative victory in the upcoming
  general election, made them more sensitive to the trade data,
  Harwood said. "The news did come as a very, very substantial
  relief," he said.
      However, on the interest rate front, economists caution
  that Lawson might be wary of leaving sterling vulnerable by
  encouraging another base rate fall. They noted Lawson had
  already got an inflation-reducing cut in mortgage rates in
  response to lower base rates, so domestic political reasons for
  lower rates have been curtailed.
  

