Good news sparks stockmarket rally

13 August 2009

The FTSE 100 hit 4771 points in late-morning trading, its highest point since the beginning of October last year and a vast improvement from the dismal lows of March.
The stockmarket index of the UK's 100 largest companies is now up 30% from the start of the year and has recovered from the near 3500 low seen just five months ago. And experts say the FTSE 100 rally still has plenty of life left in it after the index hit 10-month highs earlier today.
In recent weeks investors have been buoyed by a stream of positive economic data hinting that the worst is very much over for struggling industrialised nations. Earlier today, France and Germany saw their economies make a surprise return to growth after a year of recession, while more upbeat comments from the Federal Reserve propelled US shares higher last night.
Sarah Arkle, chief investment officer at Threadneedle, points to a number of influences that have taken the markets forward. "Equity markets have enjoyed a strong rally following the pick-up in economic sentiment, improved newsflow from the banking sector and better-than-anticipated second-quarter corporate results from around the globe," she says.

Commodity prices have also helped drive progress on the markets, with copper in particular performing well to push on miners' shares.

In recent days, copper reached a 10-month high, with oil prices also jumping 1.5% on the back of a forecast from the International Energy Agency that global demand will grow 1.5% in 2010.

That said, the price of oil remains considerably lower than last summer's historical high of $147 per barrel.

However, Arkle doesn’t rule out a correction in the near-term: "We would expect much slower progress from here, with risks of some negative news on economic growth or from early signs of stimulus withdrawals. Either of these could have a negative short-term impact."

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