Reassured by second quarter results and by a series of encouraging indicators, the world markets have rebounded significantly since the start of the summer and climbed to their highest levels this year.
Last week, Wall Street’s Standard & Poor’s 500 broad-market index surged above 1,000 on Thursday and the Paris CAC 40 on Friday rallied 1.24 percent to 3,521.14 points — both highs not seen since last November. In Tokyo, shares on Thursday reached a 10-month high with the benchmark Nikkei-225 index rising 135.56 points to 10,388.09, the best finish since Oct. 6.
The previous week, it was London’s and Frankfurt’s turn with the FTSE 100 index of leading shares and the Dax reaching 4,600 and 5,300 points respectively.
Meanwhile, oil prices rose on Thursday to US$76 a barrel in London, the highest level this year.
The markets had returned to levels last seen in October and November after the collapse in September of the US bank Lehman Brothers, considered the epicenter of the financial crisis, analysts said.
After the bank’s failure, there were fears for the future of the entire capitalist system, they said.
But the stock market rebound showed that the system “is not going to collapse,” said Francois Duhen of CM-CIC Securities.
Second quarter results, including those of US banks, prompted the rebound, with results to the middle of last month from JPMorgan Chase providing a kickstart.
“Businesses showed that they can restructure themselves and improve their margins quickly,” said Christian Parisot, shares strategist at brokers Aurel.
Economic indicators showed that in the US property prices had stopped falling and industrial production had started to pick up, said Frederic Buzare, of Dexia Asset Management.
If the worst of the crisis appears to have passed, it is still difficult to talk of a recovery while so many uncertainties remain.
A recovery would require the type of growth not yet borne out by the statistics, Parisot said.
“There are encouraging signs, but there is still the question of consumption” and employment, he said.
On Friday, monthly US employment statistics reassured the markets, with an unexpected drop in the number of people out of work.
“In terms of growth, one is clearly less worried for the third and fourth quarters” because of government bailout plans, said Duhen while warning that the benefits would progressively disappear next year.
For Buzare, next year will be the “year of all the dangers” with potential difficulties coming from an increase in the cost of raw materials, a drop in the US dollar, the normalization of public deficits and the Chinese stock exchange bubble.
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