Resurgent share prices boost confidence around globe

Cautious optimism returned to the financial markets yesterday. Diane Coyle in London and Stephen Vines in Hong Kong report on a bounce in the world's stock markets as fresh signs of strong economic growth in the US and UK bolstered investors' confidence.

Comparisons of the ups and downs in world stock markets to a roller- coaster started to look like real understatement as share prices bounced back around much of the globe yesterday.

The FTSE 100 index ended up 64 points at 4,906.4, while the Dow Jones index was up 158 points at 7,600.23 by midday. In Asia, Hong Kong and Singapore made gains of 6 per cent and 7 per cent respectively.

In the UK and US the impetus came from surveys showing that both economies are expanding rapidly. The monthly survey of purchasing managers in manufacturing by Britain's Chartered Institute of Purchasing and Supply showed a rise in output and orders in industry last month despite the continuing strength of the pound. The results, which put manufacturing activity at its highest for six months and showed the first rise in overseas orders since June, seemed to confound gloomy predictions that the exchange rate was bound to start damaging exports.

David Bloom, an economist at James Capel in London, said: "We have found that industry can live with a pound around DM2.90. If it were going to hammer exports, it should have happened by now."

Peter Thomson, director general of the CIPS, said: "Britain's manufacturing sector continues to show solid growth."

Alongside yesterday's survey came official figures showing a pick-up in the growth of M0, the narrow money measure consisting mainly of cash, to 6.4 per cent; and a report from the Halifax of a 0.4 per cent rise in house prices last month. Although the Halifax's index showed annual house price inflation of only 5.4 per cent, less than half the rate reported by the Nationwide, the lender said it showed that a "modest recovery" in the housing market was continuing.

The figures led many analysts to say the Bank of England would have to raise interest rates at some point in the near future. But most think the Monetary Policy Committee will not make the move after its meeting tomorrow and Thursday because of the recent stock market instability.

Although a rise this month would now surprise commentators, the financial markets reacted to yesterday's economic news by taking the pound higher. It climbed two pfennigs to just over DM2.91, little affected by a comment from Eddie George, Governor of the Bank of England, that the UK should be considered to be preparing for eventual membership of the single currency.

Across the Atlantic, the parallel survey of the National Association of Purchasing Managers, showed an unexpected jump in manufacturing activity in October. An increase in orders and output took the index well into what is normally considered boom territory.

As in the UK, however, analysts reckon that an expected increase in interest rates will be postponed until the episode of stock market turbulence is over.

In Asia, analysts predicted that investors would start to pay closer attention to the merits of different markets rather than taking a negative view of Asia as a whole.

"The region seems to be settling into good cases and bad cases rather than assuming that everything's linked in an identical way,'' said John Mulcahy, managing director of the W I Carr brokerage in Hong Kong.

There was some evidence for this view yesterday as some stock markets, including Hong Kong and Singapore, roared ahead, while the Thai and Philippines markets did little other than tread water.

The Singaporean government was even feeling confident enough to shrug off its own currency woes, backing moves yesterday to shore up the ailing Indonesian currency. This gained almost 6 per cent against the US dollar thanks to the massive package of overseas loans totalling some $38bn.

In Hong Kong there was a feeling ``that things have been overdone'', according to Howard Georges, the vice-chairman of South China Securities.

Confidence in the Chinese economy has grown too. The easiest way for investors to get a stake in this market is through the Hong Kong stock exchange where yesterday ``red chip'' recorded a 13 per cent rise.

But investor unease seemed to be focusing firmly on Thailand, the Philippines and South Korea because of political uncertainties.

Susan Sarandon described David Bowie as
peopleSusan Sarandon reveals more on her David Bowie romance
Lewis Hamilton walks back to the pit lane with his Mercedes burning in the background
Formula 1
Arts and Entertainment
The new characters were announced yesterday at San Diego Comic Con
comic-con 2014
Arsenal supporters gather for a recent ‘fan party’ in New Jersey
Arts and Entertainment
No Devotion's Geoff Rickly and Stuart Richardson
musicReview: No Devotion, O2 Academy Islington, London
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
ebookA unique anthology of reporting and analysis of a crucial period of history
newsComedy club forced to apologise as maggots eating a dead pigeon fall out of air-conditioning
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
Arts and Entertainment
Christian Grey cradles Ana in the Fifty Shades of Grey film
filmFifty Shades of Grey trailer provokes moral outrage in US
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

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

Best comedians: How the professionals go about their funny business, from Sarah Millican to Marcus Brigstocke

Best comedians: How the professionals go about their funny business

For all those wanting to know how stand-ups keep standing, here are some of the best moments
Jokes on Hollywood: 'With comedy film audiences shrinking, it’s time to move on'

Jokes on Hollywood

With comedy film audiences shrinking, it’s time to move on
Edinburgh Fringe 2014: The comedy highlights, from Bridget Christie to Jack Dee

Edinburgh Fringe 2014

The comedy highlights, from Bridget Christie to Jack Dee
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