Wall Street bull market makes 'technical' return

American drivers in many US states are enjoying something they had not expected to see again in their lifetime - petrol at one dollar a gallon - as crude oil prices slump worldwide because of increased supply and lower demand.

And on Wall Street, investors welcomed the return yesterday - at least technically - of a new bull market for the first time in a decade when, helped by the falling oil prices, the Dow Jones rose 20 per cent off its recent low point, the most common definition of the end of a bear market.

Crude oil prices fell further yesterday after Russia indicated it would not meet OPEC's demands and join the international oil cartel in making supply cuts. Oil company shares fell on Wall Street as US crude oil futures prices dropped below $17 per barrel for the first time since June 1999.

The exceptions among oil companies were Phillips Petroleum and Conoco, both of which gained after a $15.2 billion merger creating the world's sixth-largest publicly held oil company, with a market value of $35 billion.

Phillips recently bought up the US oil company Tosco Corporation which acquired the operating assets of the Irish National Petroleum Corporation for $100 million (€113.8 million). These assets included the Whitegate Oil Refinery in Cork and a crude oil and oil products storage complex in Bantry Bay.

The rise in the Dow and Nasdaq was propelled by hopes that the US-led war in Afghanistan was nearing an end, and that the prospect of further attacks on the United States had diminished as the hunt for Osama bin Laden was stepped up. There was also some positive corporate news.

Xerox chief executive Ms Anne Mulcahy said the office equipment giant expected to report a profit for the full year 2002, driven by new products and cost cutting. An upbeat profit outlook from the No. 2 home-improvement retailer Lowe's also helped boost optimism that the US economy would recover sooner than anticipated. Lowe's rival Home Depot also said earnings jumped 24 per cent, aided by healthy sales. Housing starts also held up well in October.

The return of a technical bull market, reached when the Dow yesterday broke through 9882.97, which was 20 per cent higher than its low of 8235.81 on September 21st, may be short-lived.

Analysts say that price to earnings ratio remains too high and corporate earnings are still too depressed for it to endure. Gains made during brief rallies in the leading indices in the past 18 months have been quickly evaporated. The US economy is almost certainly in recession, lay-offs are mounting, and recovery is not predicted before the second half of next year.

The lower oil prices brought relief to energy-dependant companies like airlines - whose stocks rose for the fifth successive session - and to heavy industry, but prices could spiral upwards again if demand picks up appreciably.

Crude oil prices varied during most of the 1990s from $17 to $22 a barrel but have been very volatile in recent years, edging up to well over $30 dollars at the end of 2000. Prices began to fall steeply after September 11th. Lack of demand and a world glut has pushed them lower in the past week.