View from City Road: Unnerving markets
Saturday 16 October 1993
Yesterday's 34.5-point rise in the FT-SE 100 was partly driven by the euphoria in Hong Kong, which spilled over into companies like Hongkong and Shanghai Banking Corporation and Cable and Wireless, while British Telecommunications is benefiting from excitement over the US tie-up between Bell Atlantic and Tele-Communications Inc. But the UK market is still pulling in funds from international investors, led by the Americans, with private investors - as in 1987 - piling in on their coat tails.
Yet, even before yesterday's peak, shares were standing close to their highest price-earnings multiple, and lowest dividend yield, for more than 20 years. That is despite economic signals that can best be described as mixed, with manufacturing output indicating that industry is still struggling against recession, while the fall in unemployment and rise in inflation make large interest-rate cuts something of a gamble.
The market has proved similarly impervious to gloomy statements from companies as diverse as Tesco and Guinness, Williams Holdings and P&O. Part of the justification for the surge in share prices in August was that the September results season would prove that analysts' growth forecasts, already demanding, were too pessimistic. Instead, downgradings have been as common as upgradings. Indeed, some brokers have revised their 1994 expectations downwards as they fear that volume and margin recovery will not be strong enough to compensate for the exchange and interest- rate benefits in the current year.
Despite the lack of positive news, however, few are predicting a sharp correction in share prices, at least in the short term. While UK economic growth may remain sluggish and the European recession will hit our growing band of international companies, equities still look a better bet than the alternatives. Interest rates are at historic lows and the consensus is still that the next movement will be down, rather than up. Bond prices have continued to rise, and may yet have some life in them as short rates fall again. But the lack of alternatives is not the most reassuring basis for buying shares.
Top Un: North Korean dictator Kim Jong-Un is Maverick as he poses with all-female pilot crew of the Anti-Air Force Unit
Belle Knox: How the porn star student from Duke University became bigger than Justin Bieber
Top 10 most expensive cities in the world: Singapore named costliest place to live – but what about London?
Oscar Pistorius trial: Athlete 'cheated on me' with Reeva Steenkamp, former girlfriend Samantha Taylor tells Pretoria court
Channel 4 announces two-hour TV show to be broadcast 'Live from Space' later this month
Apple's Tim Cook: Business isn’t just about making profit
Thousands of young people forced to go without food after benefits wrongly stopped under 'draconian' new sanctions regime
Ukraine crisis: New navy chief 'defects' and surrenders Crimean HQ as Putin claims ultranationalists forced intervention
Britain's top vet sparks controversy with call for ban on slashing animals' throats in 'ritual' slaughters for halal and kosher meat products
Ukraine crisis: Russia dismisses '3am ultimatum' as 'total nonsense'
If you're horrified by a flame-roasted dog, you should be shocked at a hog roast
- 1 The future of sex: The first female condoms were derided, mistrusted and shunned - but will their modern counterparts catch on?
- 2 South African rhino finally put down after roaming Kruger park for days with horn hacked off and bullet in brain
- 3 Italian pensioner hires an escort who turns out to be his son's girlfriend
- 4 Orgasm machine to deliver climax at the push of a button
- 5 Liam Neeson turned down James Bond role to marry Natasha Richardson
iJobs Money & Business
£12000 per annum: Inspiring Interns: The company works with Tier 1 FTSE 100 Ba...
£32000 - £36000 per annum + generous benefits: Pro-Recruitment Group: * TAX * ...
£37000 - £40000 per annum + £20000 benefits package: Pro-Recruitment Group: **...
£30000 - £35000 per annum + generous benefits: Pro-Recruitment Group: Mixed Ta...