Stock markets surge worldwide on belief worst may be over

GLOBAL STOCK markets roared to their highest levels of the year yesterday, buoyed by better-than-expected profits at some of Europe’s biggest banks and growing confidence that the worst recession in decades may soon be over. The powerful rally in equities took New York’s S&P 500 index above 1,000 for the first time since early November, propelled Europe’s leading share index to a fresh 2009 record and sent London’s FTSE 100 to its highest since October. Asian stocks surged to 11-month highs.

In Dublin, the Iseq index gained 2.67 per cent in quiet bank holiday trading to close at 2,865.73. While beleaguered Irish financials gained 1.57 per cent in low volume business, non-financial stocks added 2.84 per cent.

Shares in some of the world’s largest banks enjoyed the most impressive gains after HSBC reported pre-tax profits of $5 billion in the first six months of the year and UK-based Barclays, which acquired the US operations of Lehman Brothers last autumn, unveiled an 8 per cent jump in its interim profits.

Stephen Green, HSBC chairman, said: “We have passed or are about to pass the bottom of the cycle in the financial markets.”

Stronger manufacturing data in the US, China, the euro zone and the UK fuelled optimism the world economy was poised for recovery.

“There is one big story at the moment and that is growth. A month ago investors were looking at whether the pace of decline in the global economy was slowing. Now . . . they are not asking whether the global economy is growing, but how fast it can expand,” said Marc Chandler, analyst at Brown Brothers Harriman.

The dollar and the yen, havens for investors fleeing market turmoil, tumbled. The US currency fell to its lowest against a basket of currencies since October.Brent crude jumped to nearly $74 a barrel, up 75 per cent from January. Nouriel Roubini, the New York University economist who has been among the gloomiest of forecasters in the financial crisis, said: “As the global economy moves towards growth as opposed to a recession, you are going to see further increases in commodity prices, especially next year.”

Barclays reported record first-half income of £16.2 billion ($27.5 billion) and first-half profits of £2.9 billion, helped by a strong performance from its investment arm. HSBC reported a 50 per cent fall in first-half profits to $5 billion but its investment banking operation saw profits jump to $6.2 billion from $2.6 billion. – (Copyright The Financial Times Limited 2009)