Stock markets around the world end the millennium on new record highs

SHARE PRICES in London ended 1999 at a new record, along with shares in other European markets and Asia. The staggering rise in the US stock market, where trading for this century ends at lunchtime today, has enthused investors everywhere about the potential of new technologies.

Symbolically, the fin-de-siecle stock market surge has made Microsoft big enough to join the G7. Its market capitalisation of around $610,000,000,000 is greater than the GDP of Canada.

In London, telecoms shares, along with pharmaceuticals, oil companies and banks, led the advance yesterday. Trading volumes were very light, with private investors doing the buying and the big institutions sitting tight for the holiday season.

The London Stock Exchange said record volumes of shares were traded during 1999. International business was up 10.1 per cent by value, and domestic business 36 per cent.

Turnover in international equities reached $2,403bn, and in the UK market pounds 1,406.6bn. The total number of bargains in the UK also rose 29 per cent to a record 20,920,000. Trading on AIM grew 170 per cent by value to pounds 5.26bn, and the index climbed 133 per cent during the year to a new high of 1,872.4.

The FTSE 100 index ended a shortened day up 94 points at 6,930.2, having earlier reached 6,950.6. This took its gain for 1999 to just over 17 per cent.

Technology stocks such as Finland's Nokia, Cap Gemini in France and Deutsche Telekom, were among the biggest gainers elsewhere in Europe. The Paris and Frankfurt markets ended at their highs for the year.

In Asia the Hang Seng surged to a record close, while Tokyo's Nikkei closed at its highest level in 1999. It has climbed 37 per cent in the past 12 months.

All markets were following the lead set on Wednesday by shares in the US, with all four major markets reaching new records. The technology-heavy Nasdaq index closed above 4,000 for the first time and was up more than 1 per cent at 4,087 as trading started yesterday.

One of the biggest gains was seen by mobile phone maker Qualcomm, following a "buy" rating and $1,000 12-month target share price issued by Paine Webber. Its shares gained $156 in New York on Wednesday to reach $639, and another $89 in pre-market trading yesterday. The broker's tip added more than $30bn to the company's market capitalisation in one day.

The euphoria has made many big investors and analysts increasingly uneasy. One London-based fund manager said: "We are genuinely seeing the biggest bubble of all time in global financial markets.... This is true mania, and the maniacs are out there in force."

By past standards, many of the conventional warning signals are flashing red. In the US, for instance, the top 100 shares on Nasdaq are trading at 136-times earnings, compared to a ratio of around 10 times earnings for the market as a whole during an economic downturn.

The advance has also been unusually narrow, focussed on technology companies. The average US share has been falling in price since April 1998.

However, other equity strategists expect the major markets to make further gains next year. Many have end-2000 targets of around 7,500 for the FTSE 100 index. Richard Crehan of Morgan Stanley said the market would be more "angst-ridden" in 2000, but the big four sectors - banks, telecommunications, pharmaceuticals and oil - would deliver double-digit growth in earnings per share.

Morgan Stanley also calculates that cash flowing into the market will exceed the volume of new issues and rights issues by about pounds 50bn a year.

Long-term studies suggest that pounds 100 invested in the London stock market in 1918 had already topped the pounds 1m mark by the start of 1999 (with most of the return accounted for by reinvesting dividend income). Over the course of the century equities have outperformed gilts by an average of around 4 per cent and the trend real return on equities is just under 6 per cent, according to the CSFB Gilt-Equity study. However, shares underperformed gilts for the first eight years of the 1990s.

Conventional valuation models suggest that the only way current share prices could possibly be rationalised would be if the normal equity risk- premium has fallen or vanished.

Start your day with The Independent, sign up for daily news emails
ebooks
ebooksAn introduction to the ground rules of British democracy
Latest stories from i100
Have you tried new the Independent Digital Edition apps?
SPONSORED FEATURES
Independent Dating
and  

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

iJobs Job Widget
iJobs Money & Business

Recruitment Genius: Sales Executive / Foreign Exchange Dealer - OTE £40,000+

£16000 - £40000 per annum: Recruitment Genius: A Foreign Exchange Dealer is re...

SThree: Experienced Recruitment Consultant

£20000 - £40000 per annum + OTE + Incentives + Benefits: SThree: Established f...

SThree: Trainee Recruitment Consultant

£20000 - £25000 per annum + OTE 40/45k + INCENTIVES + BENEFITS: SThree: The su...

Recruitment Genius: Collections Agent

£14000 - £16000 per annum: Recruitment Genius: This company was established in...

Day In a Page

Refugee crisis: David Cameron lowered the flag for the dead king of Saudi Arabia - will he do the same honour for little Aylan Kurdi?

Cameron lowered the flag for the dead king of Saudi Arabia...

But will he do the same honour for little Aylan Kurdi, asks Robert Fisk
Our leaders lack courage in this refugee crisis. We are shamed by our European neighbours

Our leaders lack courage in this refugee crisis. We are shamed by our European neighbours

Humanity must be at the heart of politics, says Jeremy Corbyn
Joe Biden's 'tease tour': Could the US Vice-President be testing the water for a presidential run?

Joe Biden's 'tease tour'

Could the US Vice-President be testing the water for a presidential run?
Britain's 24-hour culture: With the 'leisured society' a distant dream we're working longer and less regular hours than ever

Britain's 24-hour culture

With the 'leisured society' a distant dream we're working longer and less regular hours than ever
Diplomacy board game: Treachery is the way to win - which makes it just like the real thing

The addictive nature of Diplomacy

Bullying, betrayal, aggression – it may be just a board game, but the family that plays Diplomacy may never look at each other in the same way again
Lady Chatterley's Lover: Racy underwear for fans of DH Lawrence's equally racy tome

Fashion: Ooh, Lady Chatterley!

Take inspiration from DH Lawrence's racy tome with equally racy underwear
8 best children's clocks

Tick-tock: 8 best children's clocks

Whether you’re teaching them to tell the time or putting the finishing touches to a nursery, there’s a ticker for that
Charlie Austin: Queens Park Rangers striker says ‘If the move is not right, I’m not going’

Charlie Austin: ‘If the move is not right, I’m not going’

After hitting 18 goals in the Premier League last season, the QPR striker was the great non-deal of transfer deadline day. But he says he'd preferred another shot at promotion
Isis profits from destruction of antiquities by selling relics to dealers - and then blowing up the buildings they come from to conceal the evidence of looting

How Isis profits from destruction of antiquities

Robert Fisk on the terrorist group's manipulation of the market to increase the price of artefacts
Labour leadership: Andy Burnham urges Jeremy Corbyn voters to think again in last-minute plea

'If we lose touch we’ll end up with two decades of the Tories'

In an exclusive interview, Andy Burnham urges Jeremy Corbyn voters to think again in last-minute plea
Tunisia fears its Arab Spring could be reversed as the new regime becomes as intolerant of dissent as its predecessor

The Arab Spring reversed

Tunisian protesters fear that a new law will whitewash corrupt businessmen and officials, but they are finding that the new regime is becoming as intolerant of dissent as its predecessor
King Arthur: Legendary figure was real and lived most of his life in Strathclyde, academic claims

Academic claims King Arthur was real - and reveals where he lived

Dr Andrew Breeze says the legendary figure did exist – but was a general, not a king
Who is Oliver Bonas and how has he captured middle-class hearts?

Who is Oliver Bonas?

It's the first high-street store to pay its staff the living wage, and it saw out the recession in style
Earth has 'lost more than half its trees' since humans first started cutting them down

Axe-wielding Man fells half the world’s trees – leaving us just 422 each

However, the number of trees may be eight times higher than previously thought
60 years of Scalextric: Model cars are now stuffed with as much tech as real ones

60 years of Scalextric

Model cars are now stuffed with as much tech as real ones