SIGNS of a strong pick up in US economic growth yesterday recharged speculation about a future rise in interest rates, sending US and European stock and bond markets lower. US gross domestic product rose at an annual rate of 4.8 per cent in the second quarters of this year, against the 4.2 per cent estimated a month ago, the Commerce Department said. Markets had expected little change in the figure.

US stocks fell sharply as investors' fears over possible rises in inflation and interests rates heightened because of the positive outlook for the economy. The Dow Jones dropped by 64 points.

Fresh concern over faster US growth was reinforced by a second Commerce Department report showing sales of new single family homes rose by 7.9 per cent to 783,000 in July. Sales were at their highest level for five months, despite mortgage rates at over 8 per cent.