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.
- 1 Forget 'The Dress': Here are five of the biggest news stories you might have missed
- 2 The black and blue dress: Makers considering a white and gold version
- 3 PornHub turns masturbation into energy in bid to save the planet
- 4 The remarkable archaeological underwater discovery that could open up a new chapter in the study of European and British prehistory
- 5 Saudi Muslim cleric claims the Earth is 'stationary' and the sun rotates around it
Boris Nemtsov shot dead: Outspoken Putin critic who had expressed fears for his life is killed near the Kremlin
PornHub turns masturbation into energy in bid to save the planet
Ukraine crisis: Top Chinese diplomat backs Putin and says West should 'abandon zero-sum mentality'
White and gold or blue and black – what colour is the dress? An eyewitness gives a definitive answer
Saudi Muslim cleric claims the Earth is 'stationary' and the sun rotates around it
New theory could prove how life began and disprove God
Half of Ukip voters say they are prejudiced against people of other races
This is what it's like to be dead, according to a guy who died for a bit
'Cash for access' scandal: Sir Malcolm Rifkind says 'unrealistic' for MPs to live on £67,000 salary
'Jihadi John': CAGE representative storms off Sky News accusing Kay Burley of Islamophobia
Aqsa Mahmood branded a 'disgrace' by her parents after claims she recruited three UK girls flying to Middle East
iJobs Money & Business
£40000 - £50000 per annum + pro rata: SThree: SThree Group have been well esta...
£30000 - £37000 per annum: Recruitment Genius: Established in 1999, a highly r...
£250-£300 Day Rate: Jemma Gent: Are you a qualified accountant with strong exp...
£230 - £260 Day Rate: Jemma Gent: Do you want to stamp your footprint in histo...