Stock markets show there are signs of optimism amid the gloom

The Dow Jones Industrial Average, still the best barometer around of the state of the US economy, this week reached its highest level since May 2008, while the technology-orientated Nasdaq Composite hasn't been as high as this since the immediate aftermath of the dot.com bubble back in late 2000.

Even more representative indices such as the S&P 500 and the FTSE All Share are racing ahead. Could it be that share prices are telling us something? Stock markets can be some of the best lead indicators around, but they are also famously unreliable. There are plenty of rallies which prove unrequited, with the economy failing to improve as anticipated.

The most notorious of these false dawns was in the aftermath of the Great Crash of 1929, when after falling more than 40pc in the initial panic, the Dow Jones then rallied sharply. Everyone rushed back in, only to lose their shirts for a second time as the stock market crashed back down again. By the time it finally hit the bottom in the summer of 1932, the Dow had lost 90pc of its value. Other, similar false rallies occurred throughout the 1930s.

The dangers of reading too much into the short-term movement of stock markets are all too apparent.

Even so, for the time being, the bulls are getting the better of the bears, so it's worth exploring why. The negatives are obvious enough. It's as plain as a pike staff that the eurozone's latest piece of sticking plaster isn't going to hold for long. Oil prices also give cause for grave concern, for we know that high oil prices, by taking money out of people's pockets that would normally be spent on other things, have a powerfully deflationary effect on Western economies.

What is more, nobody could think that the debilitating consequences of the financial crisis are now fully behind us. Cheap money alone seems to keep the whole edifice afloat. Where does the world economy look for support once the intoxicating effects of the central bank printing presses begin to wear off?

In Europe, official support for the banking sector seems only to be storing up problems for the future. Extensive use of European Central Bank (ECB) liquidity has diluted the quality of the assets used to attract market funding, creating a vicious cycle of ECB dependency that is almost bound to end badly.

And if these concerns were not bad enough, there is also the little matter of stock market valuations to worry about. Equities look relatively cheap against bonds, but that may be only because bonds, whose price has been artificially inflated by ultra-loose monetary policy, are very likely overvalued rather than shares being undervalued.

Put another way, share prices have benefited almost as much as bonds from cheap money policies, and are therefore quite vulnerable to any change in the current, zero interest rate environment.

Using the Robert Shiller valuation method - a cyclically adjusted measure that takes a moving 10-year average of historic earnings - US equities are far from cheap. True enough, they are not off-the-scale expensive, in the way they were at the turn of the century, but they are significantly above the historic average, and they are certainly at a level from which we have seen big tumbles in the past. Such valuations are only justified if you think there is further significant scope for profits growth.

You may be wondering by now where I am going to find the positives amid all these negatives. It's not easy, but stock markets are as much about sentiment as economic fundamentals, and it is important to bear in mind that all these negative risks will to some extent already be weighed in the balance. They are the known unknowns, if you like. On the whole, investors remain highly risk averse, and these are the sort of things they worry about most.

So rather than focusing on the possible downsides, we should perhaps be looking at the potential for upside surprises. Where might they come from? The most obvious source is the eurozone, whose muddling through approach to the crisis may succeed in holding the whole thing together for rather longer than conventional economic and political analysis suggests.

Perpetual crisis is not great for growth, but it is also quite plainly better than the financial Armageddon feared just a few months back. For the time being, ECB liquidity has succeeded in forestalling this more catastrophic outcome.

The longer the eurozone can keep staving off disorderly default, the more likely it is that confidence will start returning. There is a certain amount of "fear fatigue" creeping into sentiment. A backlog of opportunities, sidelined by prospects of economic meltdown, has built up, which investors and businesses will eventually grasp.

Already we are seeing the beginnings of a mini mergers and acquisitions boom. The junk bond market is returning, allowing a certain amount of leverage once more to be applied to private equity takeovers and corporate refinancing. These are all positive signs.

But the biggest potential for upside surprise is in the United States, where it is possible, and in my view quite likely, that the present economic recovery will prove more than just a pre-election flash in the pan. A self-sustaining recovery in the US, if that is what we are beginning to see, would certainly provide ample support for equity valuations at current levels. Growing energy self-sufficiency as a result of the shale gas revolution will in time remove the US as a marginal buyer of international crude, which ought to take the heat out of oil prices.

Edward Bonham Carter, chief executive of Jupiter Fund Management, reckons equity markets are likely to continue in positive mood for the next six months because of the improving economic backdrop. But he doubts the main indices will permanently move onto higher ground in the next year, in the sense of significantly breaching past all-time highs. This looks about right to me.

A more positive mood is establishing itself, but the idea that we are entering a new and sustained bull market still looks premature.

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Saudi stock market breaks three-week losing streak

Shares in Saudi Arabia have dropped in recent weeks, prompting the State purchasing Fund, news that boosted the market on Saturday. Photo: Reuters

Saudi Basic Industries Corp., manufacturer of petrochemicals most climbed 9 1pc, and Al Rajhi Bank, lender of the Kingdom, jumped 7 FP6.

The Tadawul all share index, Monte 7 3pc, the steepest gain since November 2008, at 5,709.91 at the close to Riyadh. The gauge snap a losing stria of 13 days, the longest predatory from a similar period in July 1996.

The increase in oil prices will boost the "strong condition" of the Kingdom, the Finance Minister Ibrahim al-Assaf said Al Arabiya TV.

Shares in Saudi Arabia, which makes comments 20pc of proven reserves of oil, are now attractive and retirement agency public Saudi bought shares last week, he said.

The General Organization of the State social insurance also bought stocks, according to Fuad Aghabi capital Ajeej.

"The Assaf comments have had the greatest impact on the market," said Aghabi, Director of investment Ajeej Capital in Riyadh.

Stocks fell across the region last week, sending shares of Bloomberg GCC 200 Index of the Persian Gulf level lowest since 2009 and propel the benchmark Saudi down the most in two years, on concerns that the turmoil in Libya is spreading across the Middle East.

"With my confidence in the economy and this country, I also took the opportunity" and bought shares, said Finance Minister Al Assaf. "I am an investor in the long term."

Rose oil 2 5pc to a maximum of 29 months yesterday. Crude oil for April delivery rose $104.42 per barrel on the New York Mercantile Exchange, the highest settlement since September 26, 2008.

Shia Muslims in the Eastern province of Saudi Arabia held two events on 3 March to call for the release of prisoners, a rare event in the top world oil exporter.

Department of the Interior said that demonstrations, marches Saudi and the sit-in is "strictly" prohibited by virtue of the laws of the Kingdom, reported the official Saudi press agency, quoting an unidentified Ministry official.

"Comments of the Minister of Finance contributed today to transform the concern of internal unrest," said Aghabi capital Ajeej.

"It remains to see if sentiment will continue to be positive in course of the week".

Saudi Arabia is the only Gulf Arab scholarship open on Saturday.

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Stock exchange mergers: the struggle for world domination

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What, exactly, were their competitors up to? With NYSE Euronext’s shares having risen 6pc in early trading and those in Deutsche Börse following a similar pattern, rumours circulated that the two had been suspended on their own markets.

Within 30 minutes of the LSE/TMX conference call, a statement was issued that confirmed the two smaller exchanges’ worst fears: the Americans and Germans were in 'advanced’ talks about a combination of their own. Blowing the £4.2bn London-Toronto merger out of the water, the New York-Frankfurt tie-up would be valued at about £14.4bn and control 94pc of European futures and 28pc of European equities.

After four relatively quiet years, the silence surrounding exchange consolidation was shattered by the race for repositioning as the world’s largest bourses attempt to move into growth markets, cemented by the biggest day for deal announcements in the industry’s history.

For London, what began as a day full of potential and new growth ended in worries about competition, a lack of dominance, and the City’s place in the new world order.

Although the London and Toronto exchanges had been speaking in-depth for five months, senior staff at both exchanges had known one another for years, furthered by the signing of a strategic partnership two years ago to launch EDX London, a derivatives platform powered by TMX’s SOLA derivatives trading system.

“We all talk all the time,” says Gibson-Smith. “Gradually the volume rose, and all of a sudden we were in full-blooded merger talks.”

However, it is understood the merger was accelerated in part due to the strength of personal friendship between Kloet – who will take on the role of president in the merged structure – and Raffaele Jerusalmi, who runs Borsa Italiana and the LSE’s cash equities market from London.

The two men will work under Rolet, chief executive of the enlarged group; with Fox becoming chairman and Gibson-Smith and Borsa Italiana chief Paolo Scaroni becoming deputy chairmen.

The structure of the planned merger will essentially see LSE Group – the exchange’s holding company – take over TMX in the same way it took over the Italian exchange four years ago.

As a result, local regulators will be able to continue policing their own markets – of which there will be 20 under the combined entity – with the Financial Services Authority (FSA) supervising the parent company. In Canadian circles, this aspect of the deal – and the fact that the LSE will nominate eight of 15 board directors and its shareholders will control 55pc of the overall equity - has not been well received. Not quite the 'transatlantic merger of equals’ it was first billed to be.

“No deal on merger of TMX/LSE” read the headline in the Vancouver Sun. “Proposed TMX/LSE merger will never happen” read the Toronto Star.

In a country where regional politics are often as important as national ones, negative rumblings have already begun.

Dwight Duncan, the Ontario finance minister, is said to be angered that he was given only 24 hours’ notice of the deal – “Control will rest with the other side,” he said. His is one of two provinces – along with Quebec – which has a right to veto the deal, as does the Canadian government.

With this in mind, when Kloet unveiled the deal, he was keen to stress the benefits for his home country, not least the fact that Canadian cities will be the global hub for the combined group’s equity listings, derivatives and energy business, leaving London with international listings, technology and information services. Kloet says: “We looked carefully at the benefits it can bring to Canada’s capital markets.”

Conversely, aware of adverse comment, Gibson-Smith, the LSE chairman of the geographic division of responsibilities, is quick to point out that the UK capital is not losing its power. “We’ve taken the same principle as we did with Borsa Italiana and seen where the best people [are] or best capability is and said 'you’re in charge of this’,” he says. “London’s got the chief executive, board dominance; the whole company will be regulated by the FSA. I don’t think London has lost anything, but we’ve gained Canada.”

Even if the question of nationality and who gains and who loses can be ironed out with politicians and regulators, the question remains as to whether combining London, the tenth largest global exchange, with Toronto, the 11th, will really create the “global exchange powerhouse” Fox predicts.

Even combined, the pair fall short when compared with the likes of the CME, worth $20bn (£12.5m), or the Hong Kong exchange, worth almost $25bn.

Strategically, the deal is a stepping stone for both exchanges, allowing each to access dominance in the other’s market but not squaring the circle in growth terms that access to an Asian bourse would allow.

“The Asian exchanges are all in bubbles and seriously stupidly priced,” says Gibson-Smith, who admits in conversation with The Sunday Telegraph that “you do what’s available at the time”.

However, Elie Darwish, analyst at Exane BNP Paribas, thinks the deal makes sense for both exchanges. “For the LSE, because it helps it further diversify away from under-pressure UK equities, it gives it a critical size and helps build the derivatives franchise.”

She added that for Toronto, the merger of the Singapore and Australian exchanges will create a rival in the natural resource listings, which the London tie-up will bolster.

But the deal is somewhat tinged with a sense that the pair had to merge because of their valuations and what fitted. “It’s the best deal they could have done, as there’s no one else either could have done a deal with,” says a former LSE staffer. “They’ve been limited to marriages of convenience – those who are left at the end of the dance.”

A senior industry source does not agree, however: “It’s blindingly obvious that there is a lot of upside for the users – this cultural affinity based on resources and small and medium-sized companies. After all, they’re the only two exchanges with successful SME markets.”

During the strategic dance of the exchanges from 2004-07, London’s position was always that any bid should carry a premium. That was because of London’s strategic importance as part of the fabric of one of the world’s busiest capital markets and having next to no derivatives business and no clearing operations.

But in this combination there is no premium, which analyst Raul Sinha at Nomura thinks could be a mistake. Sinha said that due to the structure of the deal and the lack of significant valuation premiums, “the potential for a counter bid from another exchange cannot be ruled out”.

That said, there is no way either exchange can stand still given the number of consolidations in the sector. The rationale for this flurry of deals is best summarised by UBS analyst Arnaud Giblat, who lists scale and distribution, technology rationalisation, product development, and positioning for market structure changes as the common themes of the deals on the table.

On top of the merger of Singapore and Australia’s exchanges, and Hong Kong’s announcement that it would also like to be involved in consolidation, the question of cost savings is key. London and Toronto expect to produce £35m of revenue synergies, rising to £100m, equivalent to 8pc of the combined cost base. However, Giblat estimates that cross-border deals usually deliver 15-20pc cost savings. The New York-Deutsche deal, which could be confirmed in detail as early as this week, will create a global exchange powerhouse, with more than $15 trillion of listed companies on its books and the largest provider of futures and options trading. In spite of the pair’s size, however, the need for the deal is obvious. NYSE once controlled 80pc of the trading in stocks listed on its markets. Today that figure stands at 23pc due to competition from Nasdaq OMX but also from trading platforms such as BATS – which is in advanced talks to take over London’s Chi-X platform – and Direct Edge.

But the deal also remains fraught with regulatory and governance problems. Combining London’s Liffe futures exchange, owned by NYSE Euronext, and the Eurex derivatives platform, owned by Deutsche, would give the pair more than 90pc of the European derivatives market. However, this could be vetoed by European regulators, as it was in 2007, which could create possible potential for the LSE in derivatives.

Questions as to where control will lie could yet cause problems. Although it was proposed that Deutsche Börse chief executive Reto Francioni will be chairman – with Duncan Niederauer, NYSE chief executive, keeping the same role in the wider business – the tussle between Frankfurt and New York could be too much to handle. The added aspect of Paris, Euronext’s old headquarters, could cause issues. Regulators from Paris and the German state of Hesse have vocalised their determination to ensure Frankfurt and Paris sit at the heart of the new group.

But these issues pale in comparison to American pride. The fact the deal is structured as a German takeover of NYSE Euronext, with Deutsche shareholders ending up with 60pc of the enlarged entity, resulted in New York Post headlines of “Achtung! Germans taking over NYSE” on Thursday morning.

The deal will be subjected to approval from the Committee on Foreign Investment in the United States. This could be where the deal falls, just like DP World’s takeover of P&O, which forced the group to sell its US operations.

Whatever the outcome of the NYSE’s flirtations with Deutsche Börse, it is London’s position that remains at stake. Using different metrics, it is possible to argue that the Toronto deal is either a defensive merger with an also-ran partner –something LSE management has discounted – or a stepping stone on the path to true global dominance.

But only in the context of the sector as a whole can this be judged, and that is the one thing the LSE, no matter how hard it tries to, cannot control.

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Stock of the STC is as FTSE reels from quake

The group titles telecoms based in the United Kingdom, who was beaten by the coalition, reducing spending, fell 3.8 - or 5 24pc - 68¾ after he revealed that Tim Weller will be leaving the company in June to "pursue new challenges".

The Daily Telegraph understands that Mr. Weller, who had been in the role of less than a year, will collect nearly 1 m £ in compensation following the termination of his contract. He will be replaced by his assistant Ian Gibson.

The announcement was compounded by a short note of Liberum capital, warned that the departure of Mr. Weller was likely to be "poorly received" by investors.

Reiterating its "sell" on society, she added: "Mr Weller was, in our view, universally well regarded and just happened to STC last May." He came to the STC with a solid reputation of his time at United Utilities. »

Disclosure of the STC came when the London Stock Exchange fell further after losses Thursday with the Japanese earthquake striking companies through the market. The FTSE 100 hardened 16.62 at 5828.6 points, equivalent to a weekly loss of 2 FP7, its worst performance in addition to eight months. During this time, the broader 250 FTSE fell 106.11 to 11409.53.

Insurers have been hardest hit by the earthquake of magnitude 8.9 as fears mounted on the volume of disaster said they are likely to face this year, after the earthquake of February in New Zealand.

RSA fell 3.5 to 133 p, while Legal & General tempered 2.3 for 115.2 p and Prudential another negative 14 to 721 sense p across the sector. Aviva shares also dropped 6.9 at £ 453. 9 p.

Despite the decline of the sector, no insurer FTSE 100 is likely to suffer claims significant earthquake of as losses will be absorbed by General insurers. Although RSA and Aviva sell general insurance policies, RSA insisted his exposure to the Japan is "unlikely to be substantial" while Aviva said he had "no exposure at all."

Analysts said insurers operating in the popular Lloyd of London market insurance would be among the hardest hit.

Also, Carnival, the largest operator of cruise in the world, is one of the biggest losers of the day, fell 72 percent to £ 26 on fears that unrest in the Middle East and rising oil prices will have an impact on its profits from 2011. In a brief statement, the company said: "prices current spot for exchange rates fuel and currency, earnings per share full year 2011 would be lower by about $0.40." In addition, the company estimates that the impact of changes in routes in the Middle East and North Africa will result in a reduction of approximately $0.05 per share for the rest of the year. »

At the other end of the scale, Aggreko reversed early losses to rise 17 percent to £ 14.07.

Temporary power provider warned that instability in the Middle East "the task of predicting the outcome of the year more than usually difficult" as profit before tax rose 24 FP6 to £ 307. 1 m in 2010. Analysts at Investec maintained their rating on the company to "buy", but warned: "there is no underlying improvements today, forecasts that may disappoint some, the crisis in the Middle East and Africa."

ARM Holdings, which designs chips for mobile devices, including Apple iPhone and iPad, gained 0.5 to 523 p. Royal Bank of Scotland has reiterated its "buy" rating on the company, with an emphasis on the fact that "over supply" issues would be not a serious problem in the long term, despite the concerns of some investors.

Among the smaller caps, retailer JD Sports reaches 47 p 930 after excluded society one sportswear made a bid for the smaller rival JJB Sports.

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Stock exchange mergers: the struggle for world domination

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What, exactly, were their competitors up to? With NYSE Euronext’s shares having risen 6pc in early trading and those in Deutsche Börse following a similar pattern, rumours circulated that the two had been suspended on their own markets.

Within 30 minutes of the LSE/TMX conference call, a statement was issued that confirmed the two smaller exchanges’ worst fears: the Americans and Germans were in 'advanced’ talks about a combination of their own. Blowing the £4.2bn London-Toronto merger out of the water, the New York-Frankfurt tie-up would be valued at about £14.4bn and control 94pc of European futures and 28pc of European equities.

After four relatively quiet years, the silence surrounding exchange consolidation was shattered by the race for repositioning as the world’s largest bourses attempt to move into growth markets, cemented by the biggest day for deal announcements in the industry’s history.

For London, what began as a day full of potential and new growth ended in worries about competition, a lack of dominance, and the City’s place in the new world order.

Although the London and Toronto exchanges had been speaking in-depth for five months, senior staff at both exchanges had known one another for years, furthered by the signing of a strategic partnership two years ago to launch EDX London, a derivatives platform powered by TMX’s SOLA derivatives trading system.

“We all talk all the time,” says Gibson-Smith. “Gradually the volume rose, and all of a sudden we were in full-blooded merger talks.”

However, it is understood the merger was accelerated in part due to the strength of personal friendship between Kloet – who will take on the role of president in the merged structure – and Raffaele Jerusalmi, who runs Borsa Italiana and the LSE’s cash equities market from London.

The two men will work under Rolet, chief executive of the enlarged group; with Fox becoming chairman and Gibson-Smith and Borsa Italiana chief Paolo Scaroni becoming deputy chairmen.

The structure of the planned merger will essentially see LSE Group – the exchange’s holding company – take over TMX in the same way it took over the Italian exchange four years ago.

As a result, local regulators will be able to continue policing their own markets – of which there will be 20 under the combined entity – with the Financial Services Authority (FSA) supervising the parent company. In Canadian circles, this aspect of the deal – and the fact that the LSE will nominate eight of 15 board directors and its shareholders will control 55pc of the overall equity - has not been well received. Not quite the 'transatlantic merger of equals’ it was first billed to be.

“No deal on merger of TMX/LSE” read the headline in the Vancouver Sun. “Proposed TMX/LSE merger will never happen” read the Toronto Star.

In a country where regional politics are often as important as national ones, negative rumblings have already begun.

Dwight Duncan, the Ontario finance minister, is said to be angered that he was given only 24 hours’ notice of the deal – “Control will rest with the other side,” he said. His is one of two provinces – along with Quebec – which has a right to veto the deal, as does the Canadian government.

With this in mind, when Kloet unveiled the deal, he was keen to stress the benefits for his home country, not least the fact that Canadian cities will be the global hub for the combined group’s equity listings, derivatives and energy business, leaving London with international listings, technology and information services. Kloet says: “We looked carefully at the benefits it can bring to Canada’s capital markets.”

Conversely, aware of adverse comment, Gibson-Smith, the LSE chairman of the geographic division of responsibilities, is quick to point out that the UK capital is not losing its power. “We’ve taken the same principle as we did with Borsa Italiana and seen where the best people [are] or best capability is and said 'you’re in charge of this’,” he says. “London’s got the chief executive, board dominance; the whole company will be regulated by the FSA. I don’t think London has lost anything, but we’ve gained Canada.”

Even if the question of nationality and who gains and who loses can be ironed out with politicians and regulators, the question remains as to whether combining London, the tenth largest global exchange, with Toronto, the 11th, will really create the “global exchange powerhouse” Fox predicts.

Even combined, the pair fall short when compared with the likes of the CME, worth $20bn (£12.5m), or the Hong Kong exchange, worth almost $25bn.

Strategically, the deal is a stepping stone for both exchanges, allowing each to access dominance in the other’s market but not squaring the circle in growth terms that access to an Asian bourse would allow.

“The Asian exchanges are all in bubbles and seriously stupidly priced,” says Gibson-Smith, who admits in conversation with The Sunday Telegraph that “you do what’s available at the time”.

However, Elie Darwish, analyst at Exane BNP Paribas, thinks the deal makes sense for both exchanges. “For the LSE, because it helps it further diversify away from under-pressure UK equities, it gives it a critical size and helps build the derivatives franchise.”

She added that for Toronto, the merger of the Singapore and Australian exchanges will create a rival in the natural resource listings, which the London tie-up will bolster.

But the deal is somewhat tinged with a sense that the pair had to merge because of their valuations and what fitted. “It’s the best deal they could have done, as there’s no one else either could have done a deal with,” says a former LSE staffer. “They’ve been limited to marriages of convenience – those who are left at the end of the dance.”

A senior industry source does not agree, however: “It’s blindingly obvious that there is a lot of upside for the users – this cultural affinity based on resources and small and medium-sized companies. After all, they’re the only two exchanges with successful SME markets.”

During the strategic dance of the exchanges from 2004-07, London’s position was always that any bid should carry a premium. That was because of London’s strategic importance as part of the fabric of one of the world’s busiest capital markets and having next to no derivatives business and no clearing operations.

But in this combination there is no premium, which analyst Raul Sinha at Nomura thinks could be a mistake. Sinha said that due to the structure of the deal and the lack of significant valuation premiums, “the potential for a counter bid from another exchange cannot be ruled out”.

That said, there is no way either exchange can stand still given the number of consolidations in the sector. The rationale for this flurry of deals is best summarised by UBS analyst Arnaud Giblat, who lists scale and distribution, technology rationalisation, product development, and positioning for market structure changes as the common themes of the deals on the table.

On top of the merger of Singapore and Australia’s exchanges, and Hong Kong’s announcement that it would also like to be involved in consolidation, the question of cost savings is key. London and Toronto expect to produce £35m of revenue synergies, rising to £100m, equivalent to 8pc of the combined cost base. However, Giblat estimates that cross-border deals usually deliver 15-20pc cost savings. The New York-Deutsche deal, which could be confirmed in detail as early as this week, will create a global exchange powerhouse, with more than $15 trillion of listed companies on its books and the largest provider of futures and options trading. In spite of the pair’s size, however, the need for the deal is obvious. NYSE once controlled 80pc of the trading in stocks listed on its markets. Today that figure stands at 23pc due to competition from Nasdaq OMX but also from trading platforms such as BATS – which is in advanced talks to take over London’s Chi-X platform – and Direct Edge.

But the deal also remains fraught with regulatory and governance problems. Combining London’s Liffe futures exchange, owned by NYSE Euronext, and the Eurex derivatives platform, owned by Deutsche, would give the pair more than 90pc of the European derivatives market. However, this could be vetoed by European regulators, as it was in 2007, which could create possible potential for the LSE in derivatives.

Questions as to where control will lie could yet cause problems. Although it was proposed that Deutsche Börse chief executive Reto Francioni will be chairman – with Duncan Niederauer, NYSE chief executive, keeping the same role in the wider business – the tussle between Frankfurt and New York could be too much to handle. The added aspect of Paris, Euronext’s old headquarters, could cause issues. Regulators from Paris and the German state of Hesse have vocalised their determination to ensure Frankfurt and Paris sit at the heart of the new group.

But these issues pale in comparison to American pride. The fact the deal is structured as a German takeover of NYSE Euronext, with Deutsche shareholders ending up with 60pc of the enlarged entity, resulted in New York Post headlines of “Achtung! Germans taking over NYSE” on Thursday morning.

The deal will be subjected to approval from the Committee on Foreign Investment in the United States. This could be where the deal falls, just like DP World’s takeover of P&O, which forced the group to sell its US operations.

Whatever the outcome of the NYSE’s flirtations with Deutsche Börse, it is London’s position that remains at stake. Using different metrics, it is possible to argue that the Toronto deal is either a defensive merger with an also-ran partner –something LSE management has discounted – or a stepping stone on the path to true global dominance.

But only in the context of the sector as a whole can this be judged, and that is the one thing the LSE, no matter how hard it tries to, cannot control.

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Stock market crash risk is developing, warns Centre for Economics and Business Research

Veteran forecaster Douglas McWilliams said: "signals seem to be building for a kind of crash of the market - shares and many links are already down significantly from their recent." Earlier this year, we gave one in five ratings on a UK relapse. Now, the chances are about one in three. »

The FTSE fell sharply from a peak of more than 6,000 in early July; whereas the Greek and Italian bond prices fell from a cliff, as investors prepare for a possible defect.

Angus Campbell, Director of sales in Paris to the spread of the company Capital spreads, said: "Sentiment is quite beat;" indices of continue to chop and change between the ups and downs. "It is impossible to make a rational decision on where to invest your money when these huge macro issues dominate the proceedings."

Mr. McWilliams criticizing the US and European politicians for the treatment of their deficits as a policy of bargaining chips. It is few options left open to them to avoid an accident, he said. "The real fear is that major economic weapons have been used to treat the last crisis." "He has no scope to reduce interest rates and printing money is regarded with skepticism, but it may be the only option."

Analysts fear a global crisis if there is any form of positive result of emergency European Summit on Thursday. Mick Gilligan, partner Killik & Co, said: "if it is not an any positive result out of Europe, it could be any of a rough summer." If politicians have disappeared from the break, the markets will wait. »

Deutsche Bank analysts, said last week that global stocks may plunge as much as 35pc if the crisis in a spiral.

Falls may be exacerbated by low trading during the summer and even the Test Match on Thursday, said Mr. McWilliams. "There is a history of crises from August as the financial crisis of 2007 and the default of 1998, not to mention the August crisis more Russian famous which became the first world war."

He joined a growing chorus of voices for a relapse. A recent Deloitte survey showed that one in three Directors finance of FTSE 100 and FTSE 250 companies estimated that the British economy will fall back into recession.

Mr. McWilliams finished by taking a potshot at David Cameron. He said that the Prime Minister could take advantage of the crisis to renegotiate links of the United Kingdom with Europe, which could bring down the Coalition and an early election of the force. "Much could happen in the coming weeks," he concludes.

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GM engine ROAR arises return in the stock market at the $trends float

After a last day orders frenzy of GM shares, Detroit company stated that it had raised $20 billion (12 6bn pounds) sale of shares for $33 each. It has the possibility to sell 23 $ billion, which would overshadow agricultural Bank of China as the flotation made Beaver in history. Shares of GM, an icon of U.S. manufacturing for more than a century, will begin trading at the New York Stock Exchange today.

The almost 50 billion $bailout in June 2009 caused controversy, but helped GM reduce costs to restructure its debt and its management of the changement.Avec an improvement in the global economy, the manufacturer has notched gains of $4 so far this year and is outstanding for its first annual profit since 2004.

"That GM has come it is certainly an achievement worthy of mention," said Howard Wheeldon, an analyst at BGC partners.

Flotation also reduces the United States Government set to 33pc 61pc, although the total game must be sold at an average of'd $ per unit for the taxpayers recover their money.GM, CFO Chris Liddell said that "with a new business model, focusing on the design, construction and selling vehicles of best in the world, we are ready to compete."

Greatly expected flotation saw almost all banks on Wall Street to take part, Morgan Stanley, JP Morgan Chase, Bank of America, Merrill Lynch and Citigroup leading underwriting.

Although controversial, GM, Chrysler and GMAC financial self bailing out registered United States loss more grosse.Le Centre for Automotive Research has calculated that increased welfare payments and lost tax revenues would have been more expensive in the long term to allow companies to fail.

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GM shares jump as a manufacturer of car returns on the stock exchange of $trends float

GM shares climbed as high as 9 1pc and were trading at $35.50 at 10 a.m. in New York. They closed at $34.19 3 6pc. After a last day orders frenzy of GM shares, Detroit company said Wednesday that he had raised billion to $20 (£ 12 6bn) sell the shares at $33 for each, making it the largest U.S. flotation. It has the possibility to sell 23 $ billion, which would overshadow agricultural Bank of China as the flotation made Beaver in history.

The almost 50 billion $bailout in June 2009 caused controversy, but helped GM reduce costs to restructure its debt and its management of the changement.Avec an improvement in the global economy, the manufacturer has notched gains of $4 so far this year and is outstanding for its first annual profit since 2004.

"That GM has come it is certainly an achievement worthy of mention," said Howard Wheeldon, an analyst at BGC partners.

Flotation also reduces the United States Government set to 33pc 61pc, although the total game must be sold at an average of'd $ per unit for the taxpayers recover their money.GM, CFO Chris Liddell said that "with a new business model, focusing on the design, construction and selling vehicles of best in the world, we are ready to compete."

Greatly expected flotation saw almost all banks on Wall Street to take part, Morgan Stanley, JP Morgan Chase, Bank of America, Merrill Lynch and Citigroup leading underwriting.

Although controversial, GM, Chrysler and GMAC financial self bailing out registered United States loss more grosse.Le Centre for Automotive Research has calculated that increased welfare payments and lost tax revenues would have been more expensive in the long term to allow companies to fail.

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GM share jump constructor returns on the stock exchange of $trends float

GM shares jumped as much as 9 1pc and were trading at $35.50 at 10: 00 a.m. in New York. After a last day orders frenzy of GM shares, Detroit company said yesterday that it had raised $20 billion (12 6bn pounds) sell the shares at $33 for each, making it the largest U.S. flotation. It has the possibility to sell 23 $ billion, which would overshadow agricultural Bank of China as the flotation made Beaver in history.

The almost 50 billion $bailout in June 2009 caused controversy, but helped GM reduce costs to restructure its debt and its management of the changement.Avec an improvement in the global economy, the manufacturer has notched gains of $4 so far this year and is outstanding for its first annual profit since 2004.

"That GM has come it is certainly an achievement worthy of mention," said Howard Wheeldon, an analyst at BGC partners.

Flotation also reduces the United States Government set to 33pc 61pc, although the total game must be sold at an average of'd $ per unit for the taxpayers recover their money.GM, CFO Chris Liddell said that "with a new business model, focusing on the design, construction and selling vehicles of best in the world, we are ready to compete."

Greatly expected flotation saw almost all banks on Wall Street to take part, Morgan Stanley, JP Morgan Chase, Bank of America, Merrill Lynch and Citigroup leading underwriting.

Although controversial, GM, Chrysler and GMAC financial self bailing out registered United States loss more grosse.Le Centre for Automotive Research has calculated that increased welfare payments and lost tax revenues would have been more expensive in the long term to allow companies to fail.

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Mounted world as China stock market slide raises rates Asia following United States, less Europe

Nikkei average of Japan more 2pc slipped and briefly touched a low interday a month on Wednesday as investors rushed to take profits. Photo: Reuters

Japan focused on exports was the hardest hit by the Nikkei index in Tokyo tumbling 1. 7pc tp 9371 points.Australie the ASX slipped 0. 7pc and Hong Kong Hang Seng 0. 6pc.

Oil prices rose above $ 80 per barrel, after attempting to China to control inflation and a property bubble prospective he dragged more than 4pc Tuesday.

The dollar edged more after that Treasury Secretary Timothy Geithner is pulled out of a strong dollar fell against the yen, the euro and the pound sterling.

Buck the trend, with ABN Korea Southern progress 1pc and Shanghai Composite 0 6pc increasingly China markets.

"China's announcement was a great surprise to the market.Attenuated sense throughout Asia as investors worried that an increase in interest rates could pressure on economic growth in China, "says Masatoshi Sato, market analyst, Mizuho investors securities in Tokyo."

Bank of China said that it will be Wednesday increase loan Yuan a year to 5 5 31pc 56pc and yuan year drops 2 5pc 2 25pc rates.

The increase in interest rates was the first to China since 2007.

Chinese economy has increased 10 3pc in the second quarter and its growth has propelled the resumption of the economy of a deep recession, while the United States and Europe struggle to return to economic works foot.

The US Federal Reserve should largely in an attempt to revive the flagging economy in November by launching a program to purchase more .the Treasury bonds ' objective would be to drive down interest rates on mortgages, loans and other debts and encourage Americans to spend.

Mervyn King, Governor of the Bank of England has also fed hopes to facilitate greater quantitative (ve) Tuesday when he says political currency continues to be a "powerful weapon" in support of recovery.

New York by the tumbling points 165.07, Dow Jones industrial average or 1. 5pc 10,978.62, fall below 11,000 for the first time in a little over a week .the ' broader S & P 500 index lost 18.81 points, or 1. 59pc 1,165.90 points.

Rich technology Nasdaq composite index shed 43.71 points, or 1 76pc 2,436.95 points, as Apple is 2 7pc on earnings as forecast estimate and IBM dropped 3 4pc due to a decline in new contracts.

In Europe, FTSE 100 has fallen from London, 0 6pc, DAX 0 the Germany 4pc France ACC 0 7pc.

FTSE 100 Great Britain has been opened 10 - 19 points lower on Wednesday, mirroring the weakness of global investors concerned about interest rates Chinese and cooled US mortgage bonds also viewed UK policy.

The minutes of the Bank of England is published at 9.30 a.m. and Chancellor announced review of expenditures at 1230.

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The Hong Kong Stock Exchange "consider docking".

HKEX, which has a market capitalization of HK$ 190bn (£ 15 billion), stated that "due to changes in the landscape of financial market"it""consider international opportunities for alliances, partnerships and other relations"."

Exchange, whose size would be equalled if merger talks $24bn (£ 14 9bn) between NYSE Euronext and Deutsche Borse succeed, said he was particularly interested in "strategically compelling consistent profits which focuses on the markets in China".

HKSE is highly valued by investors because of its position as home to the majority of overseas Chinese corporations lists.

Fellowship of Tokyo (TSE), Atsushi Saito, pattern also said that the stock market "a door open at any time". He added that the Toronto Stock Exchange, which is the second largest stock exchange in the region is not in talks to merge at this time.

The Toronto Stock Exchange is under pressure to expand internationally. Its ambitions to be the largest scholarship in the region has been challenged, especially by the $ 8 5.3 all-share offer to Exchange Singapore to the Australian Stock Exchange.

The Chicago Board Options Exchange, one of the largest awards of America, insisted he was not troubled by his rival for a new transatlantic power plans but is heavily tilted as another player in the move to consolidate.

Analysts warned that the docking of NYSE Euronext and Deutsche Borse would face some obstacles important competitions in Europe.

Investors have been positive on the London Stock Exchange £ 4 5.3 docking with Toronto's TMX reason for combinations of synergies and growth potential.

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TMX London Stock Exchange and of the Canada agree £ 4 MD fusion

Chris Gibson-Smith, President of the London Stock Exchange said: "we announced today the creation of a world leader in the space of Exchange..." I believe that together we can provide shareholders and customers a company significantly greater than the sum of our parts. »

He said fusion arrives at an "extremely important moment in the history of the capital markets.

Groupe TMX, valued at C $ 2. 97bn (£ 1. 86bn), trade, was suspended after confirmation of talks. The London Stock Exchange is estimated to be 2 £ taken, based on closing part night last price 892 p.

The merged group could be co-headquartered in London and Toronto and continues to be supervised by its existing regulatory authorities.

Xavier Rolet, LSE leader who said that he hoped "surprise everyone in the coming years" of the when he succeeded to Dame Clara Furse, will lead the enlarged company. "" Thomas Kloet, contrary, number will become President.

Wayne Fox will be non-Executive Chairman, overseeing a Board of Directors fifteen - eight of the London Stock Exchange which should should include three of Borsa Italiana and seven appointed by TMX.

Chris Gibson-Smith, who will remain Chairman of the stock exchange in London, and Paolo Scaroni will be Vice-Presidents.

The agreement two largest shareholders of London - Stock Investment Authority and Dubai - scholarship Qatar see their 20pc half about 10pc issues each.

Mr. Rolet said: "it is an incredibly exciting merger with considerable growth opportunities." We create greater place lists in the world for commodities, energy and natural resources, as well as top market sectors of range for small, middle and growing companies.

He said that the new international leader well rather than take advantage of growth opportunities in emerging markets.

"We aim at nothing less than to become a true powerhouse in the enterprise global exchange", he said.

After years of stick away approaches takeover, the agreement is an admission tacit, can no longer go it alone.

The agreement is a response to increasing competitive pressure in the industry, which saw the LSE lose foot rivals at a faster rate.

It will create a global exchange where liquidity pools can be aggregated - bringing the price down. By sharing technology, award recipient London and TMX will improve their competitive position against venus newer, faster, in an environment where scale and size determine success.

Speed stock and derivatives trading and the arrival of 'high frequency' traders have transformed the commercial landscape, where markets have fragmented away from national exchanges. Awards are now in terms of global - as fusion of the districts of Singapore and Australian - consolidate or diversify into other classes of business, allowing the costs of it to share.

In 2007, consolidation saw the New York Stock Exchange Group buy Euronext pan-European exchange; NASDAQ buy OMX; and Deutsche Borse buy International Securities Exchange, one of the largest U.S. options exchange.

During the term of eight years of Dame Clara UK exchange pushed back five approaches to takeover, including Deutsche Borse in 2004, Macquarie Australia in 2005 and Nasdaq in 2006. This last value LSE shares at £ 12,43.

When she resigned in May 2009, Dame Clara said: "don't forget the bid we received Macquarie is eight - time mobilized and of the Nasdaq near seven - time mobilized - imagine where we would today if we had accepted either of these submissions."

After being the target of the bid, the London Stock Exchange became a Consolidator. In 2007 it purchased Borsa Italiana for more than €1 (£ 1 billion), short-circuit hopes for successful LSE Nasdaq bid. Last year it acquired rival exchange and new-blood Turquoise, update market relevance.

Transaction diluted Borsa LSE 22pc – Nasdaq game a game later sold to Dubai - and created a Board on which five 12 seats were held by Italians – more likely to oppose a takeover of Nasdaq.

The agreement with TMX has similar defensive characteristics thanks to the culture of Canadian protectionism - graphically seen in November when the investment Canada Act was used to block the $38bn (plus £ 23) BHP Billiton bid for the Canada potash Corporation.

The Canadian merger may be a surprise to the LSE nostalgic 313-year history but unlikely marriage ends UK exchange paranoia regarding unwanted suitors.

Get free advice on investments maximize with Telegraph wealth management Service

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Traders "evacuate their rage" on the London Stock Exchange glitch: quotation

"It's a bit frustrating - we had reasonable shots in these markets in the last days and one cannot trade." They have not covered themselves in glory really. »

"Traders will be ventilation rage." This is yet another glitch in the negotiation and traders who remember again the same interrupted questions about 3 hours in 2009, will be without doubt be ventilation fury this morning on the London Stock Exchange. At a time of uncertainty in markets, where traders are having to keep on your toes with the situation in Libya, the last thing that they need is an unexpected shutdown in the negotiation. »

"It is not surprising that the LSE is losing market share and it is not good PR for the company which is located in the documents not only for its merger with TMX but now also for the launch of its new pan-European trading platform." The industry is consolidating as competition between exchanges became fierce and glitches like this are not our exchange of favours lighthouse. The hope is that any mergers will quickly address these technical issues. But don't hold your breath! »

"Twice in one week with the blame game in full flow does not inspire confidence." Person really failed to comment on this till after 8: 30 am, which is worrying. »

"London seems to have to use a"Kray expression", a bit of precedent in terms of its technological systems break." I am sure that they occur elsewhere in the world, but I don't know if that it is brought to our attention in the same way. LIFFE fell down about eight years on a number of occasions to acute embarrassment not only management, but also the market, because he eventually Euronext portfolio where he seems to have lived happily ever after.

"The last time that the LSE system failed to muster was in September 2008, when it was closed for a day." Since then a new computerized system called "Millennium" has been installed - more robust, more quickly and supposedly the response to problems of all merchants. I am informed reliable installation of a double operation is implausible in technical or economic terms. I'll take this comment on their nominal value. It is very frustrating that London lives remain the financial capital of the world. "

"Systems are not infallible and outages occur, however, it is essential for any primary market, system to have a high level of Exchange time."

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U.S. rallies stock on the first day of trading in 2011

U.s. stock markets were aboard in 2011, where they finished in 2010. Photo: Corbis

The S & P 500 was terminated on day 1. 13pc 1271.87, so that the Dow Jones Industrial Average closed up 0. 11670.75 8pc. Nasdaq also joined the rally after shares Apple reached a record level.

The price of oil also increased, while investors have continued dumping of obligations of the Government which began in December.

As traders made their way to work with what remains of the heavy snowfall that Manhattan was last week, feeling was supported by the latest sign that a recovery in the u.s. manufacturing sector continues to gain traction.

Institute manufacturing supply management index rose to 57 in December 56.6 but gained more strongly and production orders measures. "Growth becomes more balanced and less dependent on the inventory, as consumption, business investment cycle and improve exports, said Nigel Gault, Chief u.s. economist at IHS Global Insight.

Among the actions best - performing on Bank of America, which closed up to 6 4pc after agreeing to settle certain complaints on mortgages allegedly defective. General Motors, who returned the stock market in November after the bailout 50 billion $, also finished first day of trading 2011 more after analysts Goldman Sachs recommended investors buy shares.

Investors know that emerging markets helped buoy sales and profits for the American company since the financial crisis, but the last six weeks have seen a reversal dramatic feeling towards the United States. Which is triggered largely by an improvement in data since the end of the summer, and the fee of $854bn Cup package passed by Congress in the last weeks in 2010.

Alongside second $600bn Federal Reserve tours to mitigate quantitative, average reductions of taxes on the u.s. economy is beginning to 2011 with an amount unprecedented stimulus - say critical will be eventually practice as the deficit grows more.

Investors, for the moment at least, can instead focus on the fact that S & P has notched 75pc of earnings from the time that the index closed first trading day the year higher.

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Why we stock can be difficult to beat in 2011

With the US unemployment seems to be blocked at historically high rates of almost 10pc, interest rates look little likely to increase rapidly

Emerging markets, particularly in Asia outside of the Japan were top of the list for 2011. The United States does not get a shed.

That define my anti-conformiste antennas twitching and events on the pond last week confirmed that my opinion that the next year could be quite good for investors stock of largest in the world. Policy, the monetary and fiscal policy force corporate and evaluations all pointing to the u.s. market ending 2011 significantly higher than today's today.

Cycle electoral U.S. has tended to focus the year after the elections of mid-term, especially when a lame-duck President is obliged to keep his nose and transactions. Last week's tax package represented an important will denounce climb-down by President Obama and George W Bush beyond expire end of 2010 planned tax cuts extension removes one of the greatest obstacles to economic recovery next year. The biggest surprise in the package was a 2pc cut in contributions, which on its own will give the economy an annual boost of $120bn (£ 76bn).

This means that prospects are clearer to the United States that almost everywhere around the world. Not for American budgetary austerity will be 2011 chilly annually in the United Kingdom. For them, sovereign debt worries distressing Europe (although the 900bn increased $ to United States deficit due to measures of last week again it bite at any given time). Or they deal with the concerns of inflation, suspended over China and other emerging markets.

Inflation is, in fact, considerably less than implicit goal of Fed interest rates despite running standing with effective rate zero for two years. Goldman Sachs believes that they stay there on the other hand of two years, although the unexpected surge in yield bond 10 years in many countries over the past few weeks shows that forecasts of interest rates may be vulnerable to events.

With oscillating apparently to historically high rates of almost 10pc unemployment rate (see chart) and the actual high underemployment rate, however, I cannot see interest rates increase much in America, in the foreseeable future. Low interest rates which allowed companies to refinance debt to unprecedented conditions contributed to reaching levels near record margins. This trend has caused by particularly rapid reaction of firms to the slowdown in activity, the reverse the high unemployment rate. The net result has been that much higher than in the recession of the early 1990s and 2002 bottomed out margins.

The resumption of margins means that the average earnings for the S & P 500 components should be de-and-a-half times higher than the previous peak in 2007 and around made Beaver in 2000, when the US stock market has reached a peak of 1,527, higher than the level of today 24pc.

While assessments were then were obviously excessive, the combination of a market much lower and much higher earnings means actions are value much better today. Compensation is expected to grow at a double-digit rate both next year and the following year, to the multiple of the earnings, investors will be willing to pay can also increase. It is this combination of higher earnings and increasing prices to rates of remuneration that characterizes always the best years in the market.

The final reason why 2011 would be the year of America is the considerable weight of money is sitting on the edge of the stock market. I think that the increase in yields of government bond over the past few weeks could mark a watershed moment when investors are beginning to wonder if they got their money in the right place.

After few years outputs of mutual funds equity, wind rotates as investors accept they must move in risky assets if they hope to replace the income they have lost their deposits without risk. If the increase in bond yields change the perception that fixed income is a proxy refuge at the checkout, the United States equity market can receive significant injection of new money next year.

Easy money, growth, decent reasonable assessments and indifferent investors are quite interesting combination.

tomrstevenson@fil.com

• Tom Stevenson is Director of investment with Fidelity Investment Managers. The views expressed are his own

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Mounted world as China stock market slide raises rates Asia following United States, less Europe

Nikkei average of Japan more 2pc slipped and briefly touched a low interday a month on Wednesday as investors rushed to take profits. Photo: Reuters

Japan focused on exports was the hardest hit by the Nikkei index in Tokyo tumbling 1. 7pc tp 9371 points.Australie the ASX slipped 0. 7pc and Hong Kong Hang Seng 0. 6pc.

Oil prices rose above $ 80 per barrel, after attempting to China to control inflation and a property bubble prospective he dragged more than 4pc Tuesday.

The dollar edged more after that Treasury Secretary Timothy Geithner is pulled out of a strong dollar fell against the yen, the euro and the pound sterling.

Buck the trend, with ABN Korea Southern progress 1pc and Shanghai Composite 0 6pc increasingly China markets.

"China's announcement was a great surprise to the market.Attenuated sense throughout Asia as investors worried that an increase in interest rates could pressure on economic growth in China, "says Masatoshi Sato, market analyst, Mizuho investors securities in Tokyo."

Bank of China said that it will be Wednesday increase loan Yuan a year to 5 5 31pc 56pc and yuan year drops 2 5pc 2 25pc rates.

The increase in interest rates was the first to China since 2007.

Chinese economy has increased 10 3pc in the second quarter and its growth has propelled the resumption of the economy of a deep recession, while the United States and Europe struggle to return to economic works foot.

The US Federal Reserve should largely in an attempt to revive the flagging economy in November by launching a program to purchase more .the Treasury bonds ' objective would be to drive down interest rates on mortgages, loans and other debts and encourage Americans to spend.

Mervyn King, Governor of the Bank of England has also fed hopes to facilitate greater quantitative (ve) Tuesday when he says political currency continues to be a "powerful weapon" in support of recovery.

New York by the tumbling points 165.07, Dow Jones industrial average or 1. 5pc 10,978.62, fall below 11,000 for the first time in a little over a week .the ' broader S & P 500 index lost 18.81 points, or 1. 59pc 1,165.90 points.

Rich technology Nasdaq composite index shed 43.71 points, or 1 76pc 2,436.95 points, as Apple is 2 7pc on earnings as forecast estimate and IBM dropped 3 4pc due to a decline in new contracts.

In Europe, FTSE 100 has fallen from London, 0 6pc, DAX 0 the Germany 4pc France ACC 0 7pc.

FTSE 100 Great Britain has been opened 10 - 19 points lower on Wednesday, mirroring the weakness of global investors concerned about interest rates Chinese and cooled US mortgage bonds also viewed UK policy.

The minutes of the Bank of England is published at 9.30 a.m. and Chancellor announced review of expenditures at 1230.

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US stock markets enjoy best September for 71 years

The New York Stock Exchange, where the Dow Jones and S&P 500 recorded their highest September rises for 71 years Photo: AFP

The broader S&P 500 rose 8.8pc on the month and the Dow Jones was up 7.7pc.

The last time Wall Street saw a stronger September, when the Dow Jones soared 13.49pc , was at the start of the Second World War, when traders anticipated a strong rise in demand for US manufactured goods and war materials.

However, on Thursday the S&P 500 fell 3.53 to 1141.20 and the Dow dropped 47.23 to 10788.05 as new data on jobs and economic growth continued to indicate the economy was recovering at a slow pace.

Gross domestic product, which measures the output of goods and services in the US, increased at an annual rate of 1.7pc in the second quarter and the number of Americans filing new claims for jobless benefits fell more than expected last week for the third time in four weeks.

Separately, the ISM-Chicago Business Survey rose in September to chalk up a full twelve months of expansion, showing an improvement in industrial activity in the key area.

Sentiment has been underpinned by solid company earnings, a spate of big corporate deals, poor returns from bonds as interest rates hovering around record lows, and hopes that the US Federal Reserve will step in if growth in the world's largest economy stalls.

The FTSE 100 has joined has rally, ending the month up 6.2pc as investors looked beyond Europe's debt woes and focused on signs that the US economy is stabilising.

London's index of leading shares, down 20.6 at 5548.62 on Thursday, has risen 323 points since the end of last month, when fears of a double-dip recession weighed on equities.

The FTSE 100's performance this month compares to a 4.6pc rise last September and a 13pc fall in 2008 - when the global financial system to the brink by the collapse of Lehman Brothers.

Other major European and Asian bourses also rose strongly during September. Germany's DAX gains 5.1pc boosted by bullish consumer sentiment and strong exports. France's CAC gained 6.1pc.

In Tokyo Nikkei 225 rose 6.18pc and Hong Kong's Hang Seng jumped 8.9pc, although mainland China's Shanghai Composite only edged 0.6pc higher.

"This year’s behaviour [in equity markets] is more akin to a broad consolidation phase with underlying support from earnings, which have been stronger than expected," said Mike Lenhoff, chief market strategist at Brewin Dolphin.

He said the "recovery mometum" lost during August had returned and could continue if newsflow on the US economy stays positive and third-quarter corporate results due in two weeks remain upbeat.

"Although, we could go from under-bought to oversold," he cautioned. He said volumes have been thin which has exaggerated moves in the market.

John Brady, senior vice-president at MF Global in Chicago, said: "We could be seeing the last vestiges of the idea that too much bad news was built into the market. We could go from being overly pessimistic to overly optimistic."

However, there is still caution.Michael James, equity trading managing director at Wedbush Morgan Securities, said :"It would be a mistake to draw a conclusion that the market strength is a vote of confidence in a significantly improving US economy."

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