Bob Semple, equity strategist at NatWest Markets, said: ''This bull market has been propelled by sustained growth and low inflation, but most of the good news is priced in now.''
The FT-SE 100 index and Dow Jones index have risen 16 per cent and 25 per cent respectively so far this year. Last week, share prices in London rose 0.5 per cent and in New York more than 2 per cent.
The FT-SE 100 index ended only a fraction below its all-time high, closing at 3,564.6 on Friday. The Dow Jones index fell a modest 4.23 points on Friday, still ending the week at a record weekly close of 4,797.57.
Friday also brought the week's second profit warning on a technology stock. Apple Computer warned that earnings would be significantly below estimates. IBM had issued a warning on Wednesday.
Nick Knight, Nomura's equity guru, believes that corporate earnings on both sides of the Atlantic could turn out to be generally disappointing.
''The economic slowdown is more obvious, with the message that earnings are in trouble. The stronger dollar will constrain the corporate sector in the United States, too.''
The second threat that analysts see hanging over share prices is the risk that expectations of lower interest rates will prove unfounded.
A stronger-than-expected rise in American industrial output last month, reported on Friday, demonstrated that bonds and equities are both vulnerable to changing sentiment about interest rates.
However, Bijal Shah, international strategist at Smith New Court, remains confident. ''The US market is overvalued, but as long as interest rates are falling it can get more overvalued,'' he said.
Traders will scour this week's US economic statistics for clues about the Federal Reserve's decision at its 26 September policy meeting. The most important figures will be business inventories and housing starts.
Key August statistics that have already been published have left analysts evenly divided about whether or not there will be a small interest rate cut.
For the UK markets tomorrow's Public Sector Borrowing Requirement will dent gilts if it is as disappointing as earlier month's figures were.
More significantly, Wednesday will see the publication of minutes of the end-July monetary meeting between the Chancellor of the Exchequer and Governor of the Bank of England. They will reveal how far the Bank had already retreated from its advice to raise base rates.
However, unless there is a severe blow to interest-rate hopes, most experts reckon that the fall in the two stock markets will be limited. Takeover bids, in particular in the electricity sector, are helping to drive shares up in London.
''The market could well be pushed higher by all this activity, although I would not trust it from here,'' said Mark Brown, chief strategist at Hoare Govett.Reuse content