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.