commissioner.org
| Source | C. Ruiz |
| Date | 06/04/05/22:11 |
| Nils Pratley, Angela Balakrishnan and Ashley Seager
Tuesday April 4, 2006 Guardian Stock markets around the world made big advances yesterday as investors bet that a combination of strong economic news and more takeover deals will send prices even higher.Warren Buffett, the world's second richest person, helped the mood by revealing he has made a $14bn (£8bn) long-term bet that stock markets will not collapse.Berkshire Hathaway, Mr Buffett's investment firm, has sold a form of insurance to financial institutions wanting to protect themselves against a drop in "four major equity indexes" over the next 15 to 20 years. Three of the four of the indexes are outside the US, Berkshire said in a filing to regulators, and $14bn is the firm's maximum loss. It is one of the biggest market positions ever disclosed by Mr Buffett. The FTSE 100 index in London surged back above 6000, closing up 59.7 points, or 1%, at 6024.3, only 12 points below its five-year high achieved 10 days ago. American markets, which have been relative laggards for the past two years, showed similar gains. The Dow Jones was 100 points up but closed just35.62 points higher as rate fears set in, while the S&P 500, a broader index of top US companies, crossed 1300 for the first time since February 2001 before closing at 1297.81. Strategists said the most significant moves may be in Japan, the world's second largest economy, which has almost been written off by equity investors for the past decade. Japan's Topix index of smaller companies touched a 14-year high before slipping back. The buying spree means all-time highs for a collection of world stock markets is in sight, a position that would have been unthinkable at the depth of the dotcom fall-out three years ago. The MSCI World Index of global stock markets is only 7% below its high point recorded in 2000. Investors' appetite for the risk of owning shares was reflected in a sell-off of government bonds. Falling prices pushed up bond yields, with 10-year US treasury yields hitting a four-year high above 4.9% as investors bet that central banks such as the US Federal Reserve and the European Central Bank would keep raising interest rates in the face of the robust global economy. In the UK, the yield, or income, on 10-year gilts rose to 4.42%, the highest level since last autumn. Evidence of inflationary pressures was seen in commodity markets, where the prices of oil and gold and most other metals climbed. In London, Brent crude rose by $1.65 to touch $67.93 a barrel at one point, the highest level since last September and within a dollar of the all-time high hit in the wake of Hurricane Katrina in August last year. Copper, up 25% this year, and zinc, 40% better since January, achieved new all-time highs. Gold jumped to a 25-year high of $591.50 an ounce in intra-day trading. Andrew Milligan, head of global strategy at Standard Life, said: "I think at the moment investors are realising there are two major things taking place. Positive corporate profits are coming through, partly in statements coming from companies and solid economic data. Lots of business surveys are showing that it is not just the US economy, but the world economy doing well." More bids for public companies by private equity firms are almost guaranteed. Texas Pacific Group, whose investments in Britain have included Debenhams and Punch Taverns, will soon reveal that it has raised a record $14.25bn (£8.2bn) for a new fund. Kohlberg Kravis Roberts is likely to beat that with a $15bn fund. |
Copyright (c) 1998, Joongpil Cho