Share markets scale new peaks


Economics Correspondent

Share prices in London closed at a new record yesterday, powered by a further surge on Wall Street, and hopes of lower interest rates. Investors shrugged off turmoil in the Conservative Party.

The London rally came on the back of new optimism about the prospects for a deal between President Clinton and Congress on the budget, which sent US shares higher again yesterday. The Federal Reserve is firmly expected to cut interest rates as a reward for an agreement ending the stalemate that has partially closed the Federal government since the middle of December.

The FT-SE 100 index ended the day nearly 28 points higher at 3715.6. This was lower than the day's highs, but the tone was set in the morning by euphoria over Tuesday's 60-point gain in the Dow Jones index. A weak survey of manufacturing also helped by confirming interest rate hopes.

The Dow finished the day at 5194, up 16.6. By the time London closed, many European bourses had already set their own records. Frankfurt ended just below its all-time high, while Paris was sharply higher.

Since the beginning of 1995 shares in Britain and the US have made spectacular advances. The FT-SE 100 index has climbed by more than 650 points, a 21 per cent increase. Wall Street has risen by 35 per cent. A widespread belief in the ''January factor'', whereby the stockmarket's performance in the first month sets the tone for the rest of the year, has also contributed to market optimism. However, many analysts are cautious about prospects for 1996.

Mark Brown, chief strategist at the broker Hoare Govett, said: ''We are now in the middle of a speculative bubble driven by liquidity. Like all bubbles, it will burst at some stage.'' He added that London would underperform other markets because political uncertainties loomed so large this year.

The dollar bounced to its highest level against the yen for more than three months. Most analysts expect the US currency to move higher than the level of 104.6 and DM1.4421 it had reached by midday yesterday in New York. ''This year the dollar will go up and stay up,'' said Paul Chertkow at the investment bank UBS.

The budget talks resumed yesterday, with reports that Tuesday's meeting had been productive. The approach of President Clinton's State of the Union address later this month and the start of the presidential primaries are seen as powerful motives to end the stalemate.

''The overwhelming feeling is that we're going to get a credible budget agreement,'' said Kevin Flanagan, an analyst at Dean Witter Reynolds in Wall Street. At Chemical Bank, Malcolm Barr added: ''US bonds and equities seem to be dragging the dollar up''.

The market consensus is that the dollar will climb past 110 and DM1.55 during the course of this year. Mr Barr said the US markets looked attractive to international investors.

The financial markets' strength is driven by expectations of further cuts in interest rates by the Federal Reserve. It shaved a quarter point off its key Federal Funds rate last month.

''That move was a downpayment. The Fed will do more if there is a budget deal,'' Mr Chertkow said.

The Fed cut rates from 5.75 to 5.5 per cent last month. Its next policy meeting takes place on 30-31 January.

The dollar reached 104.65 on 20 September, up from a low of 80.63 six months earlier - thanks to co-ordinated action by the G7 industrial countries. It touched DM1.50 in September.

Susan Sarandon described David Bowie as
peopleSusan Sarandon reveals more on her David Bowie romance
Arsenal supporters gather for a recent ‘fan party’ in New Jersey
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
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
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
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
Dejan Lovren celebrates scoring for Southampton although the goal was later credited to Adam Lallana
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
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

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