Footsie joins global share surge to hit fresh heights

A surge in share prices rippled across the time zones from Hong Kong to New York yesterday. The reason was a heady combination of merger mania, optimism about interest rates and the first ray of hope on Asia's economic prospects. Diane Coyle in London and Stephen Vines in Hong Kong followed the action.

Share prices leapt around the globe, thanks to the news of the huge pharmaceuticals merger between Glaxo Wellcome and SmithKline Beecham and confidence in the financial markets that US, German and UK interest rates are unlikely to rise this week.

In London the FTSE-100 index ended 141 points higher at a record of 5,599, equivalent to a pounds 24bn increase in the value of shares. It was the fourth new high on the trot, although tantalisingly below the 5,600 barrier it had breached earlier in the day.

Shares in drugs companies, along with Hong Kong-related stocks such as HSBC and Standard Chartered, made the biggest leaps. Analysts reckoned the pharmaceuticals industry would now see further bids and mergers.

"What we have is merger mania," said Trevor Greetham, a strategist at Merrill Lynch. The Paris and Frankfurt bourses also beat their previous records.

Soon after trading started on Wall Street the Dow Jones index soared back past the 8,000 level. The index finished 201 points ahead at 8108, a 2.55 per cent gain. It was the fourth-largest single-day points gain in the average's history.

Asian markets had earlier set the buoyant tone on the first trading day of the Chinese Year of the Tiger. Hong Kong led the pack, on the day known traditionally as "the red opening", with a spectacular 14 per cent gain in share prices.

It was the third highest percentage rise ever and the second highest points increase, taking the Hang Seng Index up 1,326 points to 10,578.6. Volumes traded were also far higher than in recent weeks.

After this start, it was easy for optimism about the economy and interest rates to take hold in the markets. Although the Federal Reserve, the Bank of England and the Bundesbank all hold key meetings this week, none is expected to increase the cost of borrowing.

In the UK this optimism was boosted by a survey suggesting that growth in manufacturing fell back last month to its lowest since August. The survey, by the Chartered Institute of Purchasing and Supply, showed that export orders and employment were down in January, although domestic orders kept output rising.

The activity index fell from 52.7 in December to 51.3 - expanding, but barely. "Industry needs a further tightening in monetary policy like a hole in the head," said Jonathan Loynes, an economist at HSBC Markets.

Despite the economic slowdown, analysts remain optimistic about prospects for corporate profits, and hence share prices, this year. Bob Semple at NatWest Markets said: "What the Glaxo deal is telling us is that the pressure will not be on profit margins so much as people finding themselves out on the street without a job."

Separately, the Halifax said house prices had risen 0.6 per cent in January, or 5.8 per cent year-on-year. Although last month's increase took them to the highest since the 1989 boom, the Halifax predicted "moderate" house price growth this year. In the US, Alan Greenspan, the Fed chairman, signalled no move on rates there for the time being. Although the economy is booming, there are only tentative signs of inflationary pressure.

Investors are now hoping that the momentum will continue, putting an end to the volatility in global stock markets.

Richard Witt, the managing director of the stockbrokers United Mok Ying Kie, said yesterday's rise was attributable to better regional prospects. But Nikko Securities in Hong Kong warned that the current reporting season would produce some unpleasant news as a result of the high interest rates in the fourth quarter of last year. "We are not calling this a turning- point," said the brokerage.

A notable feature of yesterday's trading was the high-profile participation of overseas fund managers. This was particularly true in Singapore, where shares climbed more than 10 per cent. Bangkok was up 11 per cent and Jakarta showed almost a similar rise.

In Tokyo the Nikkei 225 made more modest progress, ending 148 points higher at 16,776.82.

The Korean stock market, however, was down almost 5 per cent yesterday. But the fall was due to profit-taking in the wake of the impressive 56 per cent rise in stock prices since the beginning of 1998.

Outlook, page 25

Suggested Topics
News
Susan Sarandon described David Bowie as
peopleSusan Sarandon reveals more on her David Bowie romance
Sport
Arsenal supporters gather for a recent ‘fan party’ in New Jersey
football
Sport
sportDidier Drogba returns to Chelsea on one-year deal
Arts and Entertainment
The Secret Cinema performance of Back to the Future has been cancelled again
film
PROMOTED VIDEO
Life and Style
Balmain's autumn/winter 2014 campaign, shot by Mario Sorrenti and featuring Binx Walton, Cara Delevingne, Jourdan Dunn, Ysaunny Brito, Issa Lish and Kayla Scott
fashionHow Olivier Rousteing is revitalising the house of Balmain
News
people
Arts and Entertainment
Christian Grey cradles Ana in the Fifty Shades of Grey film
filmFifty Shades of Grey trailer provokes moral outrage in US
News
BBC broadcaster and presenter Evan Davis, who will be taking over from Jeremy Paxman on Newsnight
peopleForget Paxman - what will Evan Davis be like on Newsnight?
Life and Style
fashionCustomer complained about the visibly protruding ribs
Voices
The new dawn heralded by George Osborne has yet to rise
voicesJames Moore: As the Tories rub their hands together, the average voter will be asking why they're not getting a piece of the action
Sport
Dejan Lovren celebrates scoring for Southampton although the goal was later credited to Adam Lallana
sport
News
newsComedy club forced to apologise as maggots eating a dead pigeon fall out of air-conditioning
Arts and Entertainment
Jo Brand says she's mellowed a lot
tvJo Brand says shows encourage people to laugh at the vulnerable
Life and Style
People may feel that they're procrastinating by watching TV in the evening
life
News
ebookA unique anthology of reporting and analysis of a crucial period of history
Latest stories from i100
Have you tried new the Independent Digital Edition apps?
Independent Dating
and  

By clicking 'Search' you
are agreeing to our
Terms of Use.

iJobs Job Widget
iJobs Money & Business

Senior Risk Manager - Banking - London - £650

£600 - £650 per day: Orgtel: Conduct Risk Liaison Manager - Banking - London -...

The benefits of being in Recruitment at SThree...

£18000 - £23000 per annum + Comission: SThree: SThree, International Recruitme...

Test Analyst - UAT - Credit Risk

£280 - £300 per day + competitive: Orgtel: Test Analyst, Edinburgh, Credit Ris...

Trainee Recruitment Consultants - Banking & Finance

£20000 - £25000 per annum + OTE £40,000: SThree: SThree Group have been well e...

Day In a Page

Evan Davis: The BBC’s wolf in sheep’s clothing to take over at Newsnight

The BBC’s wolf in sheep’s clothing

What will Evan Davis be like on Newsnight?
Finding the names for America’s shame: What happens to the immigrants crossing the US-Mexico border without documents who never make it past the Arizona desert?

Finding the names for America’s shame

The immigrants crossing the US-Mexico border without documents who never make it past the Arizona desert
Inside a church for Born Again Christians: Speaking to God in a Manchester multiplex

Inside a church for Born Again Christians

As Britain's Anglican church struggles to establish its modern identity, one branch of Christianity is booming
Rihanna, Kim Kardashian and me: How Olivier Rousteing is revitalising the house of Balmain

Olivier Rousteing is revitalising the house of Balmain

Parisian couturier Pierre Balmain made his name dressing the mid-century jet set. Today, Olivier Rousteing – heir to the house Pierre built – is celebrating their 21st-century equivalents. The result? Nothing short of Balmania
Cancer, cardiac arrest, HIV and homelessness - and he's only 39

Incredible survival story of David Tovey

Tovey went from cooking for the Queen to rifling through bins for his supper. His is a startling story of endurance against the odds – and of a social safety net failing at every turn
Backhanders, bribery and abuses of power have soared in China as economy surges

Bribery and abuses of power soar in China

The bribery is fuelled by the surge in China's economy but the rules of corruption are subtle and unspoken, finds Evan Osnos, as he learns the dark arts from a master
Commonwealth Games 2014: Highland terriers stole the show at the opening ceremony

Highland terriers steal the show at opening ceremony

Gillian Orr explores why a dog loved by film stars and presidents is finally having its day
German art world rocked as artists use renowned fat sculpture to distil schnapps

Brewing the fat from artwork angers widow of sculptor

Part of Joseph Beuys' 1982 sculpture 'Fettecke' used to distil schnapps
BBC's The Secret History of Our Streets reveals a fascinating window into Britain's past

BBC takes viewers back down memory lane

The Secret History of Our Streets, which returns with three films looking at Scottish streets, is the inverse of Benefits Street - delivering warmth instead of cynicism
Joe, film review: Nicolas Cage delivers an astonishing performance in low budget drama

Nicolas Cage shines in low-budget drama Joe

Cage plays an ex-con in David Gordon Green's independent drama, which has been adapted from a novel by Larry Brown
How to make your own gourmet ice lollies, granitas, slushy cocktails and frozen yoghurt

Make your own ice lollies and frozen yoghurt

Think outside the cool box for this summer's tempting frozen treats
Ford Fiesta is UK's most popular car of all-time, with sales topping 4.1 million since 1976

Fiesta is UK's most popular car of all-time

Sales have topped 4.1 million since 1976. To celebrate this milestone, four Independent writers recall their Fiestas with pride
10 best reed diffusers

Heaven scent: 10 best reed diffusers

Keep your rooms smelling summery and fresh with one of these subtle but distinctive home fragrances that’ll last you months
Commonwealth Games 2014: Female boxers set to compete for first time

Female boxers set to compete at Commonwealth Games for first time

There’s no favourites and with no headguards anything could happen
Five things we’ve learned so far about Manchester United under Louis van Gaal

Five things we’ve learned so far about United under Van Gaal

It’s impossible to avoid the impression that the Dutch manager is playing to the gallery a little