Footsie joins global share surge to hit fresh heights
Tuesday 03 February 1998
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
- 1 Katie Hopkins attacked me on Twitter — so I reported her to the police for inciting racial hatred
- 2 I might be an MP, but that doesn't stop me fighting sexism with my breasts
- 3 Google April Fools': company unveils backwards search engine and huggable digital assistant
- 4 April Fools' Day 2015: The best hoax news stories from around the internet
- 5 Gamers confess the worst things they've done in The Sims
University of Cambridge: Remains of 1,300 scholars are found under building
April Fools' Day 2015: The best hoax news stories from around the internet
April Fools' Day 2015 live: The best pranks and fake stories from around the world
Turkey power cut: Prime Minister says nationwide blackout could be caused by terrorists
Jeremy Clarkson 'could be given minder' ahead of a potential Top Gear return
Ukip supporters are 55 or older, white and socially conservative, finds British Social Attitudes Report
Street preacher quoting from the Bible fined for calling homosexuality an 'abomination'
Katie Hopkins attacked me on Twitter — so I reported her to the police for inciting racial hatred
Woman filmed launching racist tirade against men on the Tube for speaking in 'own lingo'
The West has it totally wrong on Lee Kuan Yew
David Cameron calls Labour 'hopeless, sneering socialists' while announcing 7-day NHS plans
iJobs Money & Business
£20000 per annum + commission: SThree: Sthree have an exciting opportunity for...
£18000 - £32000 per annum: Recruitment Genius: A Telesales Executive is requir...
£45000 - £50000 per annum + benefits : Ashdown Group: A highly successful, glo...
£50,000 - £55,000: Neil Pavier: Are you a professionally qualified commercial ...