Stock markets around the world surged yesterday as investors ignored heightened tensions in the wake of the Bali bombings to bet on a sustained economic recovery.
The US market benefited from the busy corporate reporting season, with strong profits from the financial services giant Citigroup and General Motors, the world's biggest car maker, helping the Dow Jones index end up 378, or 4.8 per cent, at 8,256.
But the chip maker Intel dampened the mood after Wall Street closed, reporting lower- than-expected net earnings of $686m (£444m) for the quarter and warning that the economy was still not recovering in its sector. Its shares slumped 12 per cent in after-hours trading.
Earlier in the day, more than £47bn was added to the value of shares in London as the FTSE 100 index of blue chip shares surged almost 200 points one of its biggest points gains. The 5 per cent leap took the FTSE 100 back through the 4,000-point barrier and marked a 10 per cent climb over the past five trading days.
The rise was driven by banking stocks, which all rose as Bank of Ireland detailed its bid for Abbey National. But the gains were widespread with 93 of the 100 stocks up on the day.
The euphoria in London was matched by similar rises in Europe's other major stock markets. On Wall Street, the major US indices the Dow, Nasdaq and S&P 500 have added $1 trillion since touching multiyear lows last week.
About 150 of the Standard & Poor's 500 index companies are scheduled to post results this week. So far most have reported profits in line with forecasts breaking a long run of nasty surprises for investors.
However, strategists are still divided over whether the rally can be sustained. "We want to see stocks to start to react neutrally, if not positively, to bad news before buying shares," said Charlie Crane, a strategist at Victory SBSF Capital Management in the US.
Henk Potts, at Barclays Private Clients in London, said: "The fact [the FTSE 100 has] broken through the 4,000 level is significant. But there are still some fundamental questions about the economic situation, corporate profitability and political concerns."
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