London stocks surge to record high as bid fever takes hold
Friday 26 November 1999
Bid fever, combined with optimism about prospects for the economy, sent the FTSE 100 index 121 points higher to close at 6,682.8, compared with its previous record close of 6,621 attained in July. Clearance of Bank of Scotland's bid for National Westminster Bank yesterday afternoon helped to keep up the day's momentum.
The pound climbed to 63.02p to the euro, which also remained close to its low of just over $1.01. Analysts said that investors remain far more optimistic about growth prospects in America and Britain than in the Continent.
Otmar Issing, chief economist of the European Central Bank, said the European single currency's weakness was temporary and reflected perceptions that US growth would be strong. "We have no reasons to be nervous," he said.
But Patricia Hewitt, Trade and Industry minister, speaking at the Centre for European Reform, said: "We have to have structural economic reform in Europe if the euro is to succeed as a currency."
In a fresh sign of the health of the British economy, manufacturing orders improved further in November, the Confederation of British Industry said yesterday. The CBI substantially raised its growth forecasts for the UK, saying the economy would expand by 1.8 per cent this year and by 2.9 per cent next year. Three months ago it was predicting growth of just 1.2 per cent and 2.3 per cent for 1999 and 2000 respectively.
The employers' organisation warned that manufacturers' export orders remained weak because of the strength of the pound. Even so, the balance of manufacturers reporting rising orders was minus 16 per cent, a big improvement on last year and the least negative stance since March 1998.
"This improvement coincides with more favourable conditions in the Euroland economies, which are offsetting the continued strength of sterling," said Sudhir Junankar, a CBI economist.
Further evidence of vigorous expansion in Euroland emerged with a surge in third-quarter gross domestic product reported in France and the Netherlands, and an increase in industrial production across the Euro 11 countries in September. French GDP jumped by 1 per cent in the third quarter; for the Netherlands the rise was 1.1 per cent. Even laggardly Germany is expected to have achieved growth of 0.6 per cent in the third quarter.
Separately, a survey of growing businesses carried out by venture capital group 3i showed a sharp increase in business confidence in continental Europe in the latest six months.
However, some of the Continent's financial markets continue to shrug off the evidence of widespread European recovery. Klaus Kusber, an analyst at Dresdner Kleinwort Benson in Frankfurt, said: "The main reason for [the German market's] current weakness is how global investors see the structural problems existing in Germany."
The US still forges ahead; figures this week showed third-quarter growth revised up to a massive 5.5 per cent annual rate, with no sign of inflation. Even Japan is displaying strong signs of recovery thanks to economic restructuring.
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