City: Shares fraught with uncertainty

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BY ANY standards, the London stock market is going through an extraordinary phase. Seven consecutive trading days of falling share prices, I am told, is unprecedented in the history of the FTSE-100 share index. Then, just as everyone thought that such a freak pattern must portend some dreadful cataclysm, the bounce suddenly came; no headlong plunge into the depths that some were predicting. By Friday prices were recovering nicely, with the FTSE rising by nearly 40 points. We are in uncharted territory, and it is a brave person who predicts with certainty where share prices are headed from here.

On any long-term view, London share prices are beginning to look absurdly cheap, but for the time being nobody seems prepared to stretch their time horizon beyond a couple of months. In the present mood of gloom and doom, it hardly takes anything by way of faintly bad financial and economic news to drive the market lower. But it seems to take a lot to move it higher.

Mildly encouraging economic news, such as official figures last Thursday showing a slight rise in manufacturing output, certainly won't do the trick. In any case, the stock market just doesn't seem to believe anything with an official Whitehall or government stamp on it these days. The only thing that matters is what industrialists and bankers say about the economy, and they show little sign of changing their tune. A contrary thinker would be buying shares right now. But I wouldn't if I were you. With pressure on the pound threatening another rise in interest rates - more screams of pain from industry - it is hard to find a single reason for being bullish.