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
Start your day with The Independent, sign up for daily news emails
ebooksNow available in paperback
Latest stories from i100
Have you tried new the Independent Digital Edition apps?
Independent Dating

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

iJobs Job Widget
iJobs Money & Business

Sheridan Maine: Commercial Finance Manager

Up to £70,000 per annum + benefits: Sheridan Maine: Are you a qualified accoun...

Sheridan Maine: Regulatory Reporting Accountant

Up to £65,000 per annum + benefits: Sheridan Maine: Are you a qualified accoun...

Ashdown Group: Marketing Services Manager - (communications, testing, DM)

£32000 - £35000 per annum + benefits: Ashdown Group: Marketing Services Manage...

Guru Careers: Finance Account Manager

£Neg. (DOE) + Excellent Benefits: Guru Careers: A Finance Account Manager with...

Day In a Page

Homeless Veterans appeal: 'You look for someone who's an inspiration and try to be like them'

Homeless Veterans appeal

In 2010, Sgt Gary Jamieson stepped on an IED in Afghanistan and lost his legs and an arm. He reveals what, and who, helped him to make a remarkable recovery
Could cannabis oil reverse the effects of cancer?

Could cannabis oil reverse effects of cancer?

As a film following six patients receiving the controversial treatment is released, Kate Hilpern uncovers a very slippery issue
The Interview movie review: You can't see Seth Rogen and James Franco's Kim Jong Un assassination film, but you can read about it here

The Interview movie review

You can't see Seth Rogen and James Franco's Kim Jong Un assassination film, but you can read about it here
Serial mania has propelled podcasts into the cultural mainstream

How podcasts became mainstream

People have consumed gripping armchair investigation Serial with a relish typically reserved for box-set binges
Jesus Christ has become an unlikely pin-up for hipster marketing companies

Jesus Christ has become an unlikely pin-up

Kevin Lee Light, aka "Jesus", is the newest client of creative agency Mother while rival agency Anomaly has launched Sexy Jesus, depicting the Messiah in a series of Athena-style poses
Rosetta space mission voted most important scientific breakthrough of 2014

A memorable year for science – if not for mice

The most important scientific breakthroughs of 2014
Christmas cocktails to make you merry: From eggnog to Brown Betty and Rum Bumpo

Christmas cocktails to make you merry

Mulled wine is an essential seasonal treat. But now drinkers are rediscovering other traditional festive tipples. Angela Clutton raises a glass to Christmas cocktails
5 best activity trackers

Fitness technology: 5 best activity trackers

Up the ante in your regimen and change the habits of a lifetime with this wearable tech
Paul Scholes column: It's a little-known fact, but I have played one of the seven dwarves

Paul Scholes column

It's a little-known fact, but I have played one of the seven dwarves
Fifa's travelling circus once again steals limelight from real stars

Fifa's travelling circus once again steals limelight from real stars

Club World Cup kicked into the long grass by the continued farce surrounding Blatter, Garcia, Russia and Qatar
Frank Warren column: 2014 – boxing is back and winning new fans

Frank Warren: Boxing is back and winning new fans

2014 proves it's now one of sport's biggest hitters again
Jeb Bush vs Hillary Clinton: The power dynamics of the two first families

Jeb Bush vs Hillary Clinton

Karen Tumulty explores the power dynamics of the two first families
Stockholm is rivalling Silicon Valley with a hotbed of technology start-ups

Stockholm is rivalling Silicon Valley

The Swedish capital is home to two of the most popular video games in the world, as well as thousands of technology start-ups worth hundreds of millions of pounds – and it's all happened since 2009
Did Japanese workers really get their symbols mixed up and display Santa on a crucifix?

Crucified Santa: Urban myth refuses to die

The story goes that Japanese store workers created a life-size effigy of a smiling "Father Kurisumasu" attached to a facsimile of Our Lord's final instrument of torture
Jennifer Saunders and Kate Moss join David Walliams on set for TV adaptation of The Boy in the Dress

The Boy in the Dress: On set with the stars

Walliams' story about a boy who goes to school in a dress will be shown this Christmas