Global shares stage dramatic recovery

The FTSE 100 index of leading shares surged to a ten-month high yesterday, reaching 4,896 with a 45 point rise, for its fifth daily gain in a row. Global markets have gained £7.6tr in value since the lows in March when pessimism was at its worst and the world’s economies looked to be heading for depression.

For the FTSE 100 that has meant a 40 per cent leap, while in the US the S&P 500 Index is up 50 per cent and some smaller markets have more than doubled.

Last Friday US Federal Reserve chairman Ben Bernanke - set to be nominated by President Obama for a second four-year-term - said that "economic activity appears to be levelling out", over and since then markets have been powering ahead. The FTSE 100 is now only 10 per cent lower than it was before the Leman Brothers failure which started the negative train of events.

Banks have been leading the rally, with part-nationalised Lloyds and RBS up around six per cent yesterday and now mining companies like Kazakhmys and Rio Tinto have joined the party, with gains of around five per cent on the day.

As a result of increasing economic hopes, oil prices too have gained steadily, with Brent crude reaching $74.33 yesterday. The price is still some way off its $145 high last summer, but is gaining steadily as buyers bet on growing growth leading to more demand for the commodity.

And the optimism has fed through into the real economy too, with UK house prices up 7.5 per cent since March.

WHAT THEY ARE SAYING
Simon Denham, managing director of spread betting firm Capital Spreads, Daily Telegraph: "With yet another month almost over without some horrendous thing going wrong I suppose it is natural that more and more of the fence sitters are tempted, finally, to dip a toe into the water."

Nouriel Roubini, Financial Times : "Oil, energy and food prices are now rising faster than economic fundamentals warrant, and could be driven higher by excessive liquidity chasing assets and by speculative demand. Last year, oil at $145 a barrel was a tipping point for the global economy, as it created negative terms of trade and a disposable income shock for oil importing economies. The global economy could not withstand another contractionary shock if similar speculation drives oil rapidly towards $100 a barrel. In summary, the recovery is likely to be anaemic and below trend in advanced economies and there is a big risk of a double-dip recession."