The S&P 500 jumped 3.3 per cent to an all-time high of 1012.46, topping 1000 on Monday for the first time. While companies such as Caterpillar and Nike reported slower Asian business, investors have concluded that rebounding European economies and the steady expansion of the domestic US economy will boost most companies' earnings in 1998. "The conclusion from fourth-quarter earnings is that the impact from Asia wasn't so bad," said Richard Pender, money manager at National Life Investment in Vermont.Analysts said the recent surge in trading volume in New York is a sign that investors are increasingly confident that the worst of Asia's problems are over. "Business travel has been quite sluggish and the pound is still strong," said Andrew Light, an analyst with Salomon Smith Barney. "BA is clearly losing some market share to continental airlines."Copyright: IOS & Bloomberg. US STOCKS are expected to rise this week as concern about the impact of slowing Asian economies on profits eases and investor demand for stock mutual funds picks up The majority of fourth-quarter earnings reports are in. Europe's largest airline is expected to report that net profits for the three months to 31 December fell 20.2 per cent to pounds 75m from pounds 94m a year earlier, hurt by the strength of sterling.
Analysts expect earnings per share to fall to 29.37p from 30.4p last year.The company's shares rose towards the end of the week as analysts began to say a grand jury investigation in the US will probably have a limited effect on its earnings. The grand jury is investigating allegations a Reuters subsidiary stole data from Bloom- berg, the parent of Bloomberg News, a competitor.Shares in British Airways may fall after it reports third-quarter earnings on Monday. "The indications from American stocks suggest that."Lloyds TSB Group is slated to release full-year results on Friday. Earnings per share for Britain's largest bank are expected to rise to 41.7p from 31.2p for last year. Reuters, the financial information distributor, releases full-year figures on Tuesday. It first broke last October's record on 28 January and followed with consecutive record highs in the next four sessions.The index's records were broken last week as the Bank of England kept interest rates un- changed on Thursday and "merger mania" dominated the market after SmithKline Beech- am and Glaxo Wellcome announced they were in merger talks last weekend.SmithKline and Glaxo said they were discussing the creation of the world's largest drug company, a position currently held by Novartis. Drug stocks worldwide gained amid speculation the industry is in for a more consolidation.
Bank shares were similarly lifted by merger speculation.Oil stocks may extend Friday's gains as Shell, the world's largest listed oil company, and BP, Europe's second largest oil company, are both due to release earnings. "I think the results figures will be fine," said Neil Birrell, an investment manager at Framlington Investment Management. That was its sixth closing high this year and gave the index a 3.14 per cent gain since the preceding Friday, with drugs leading the advance. Royal Dutch/Shell Group, British Petroleum, Lloyds TSB Group and British Telecommunications are all due to release earnings by Friday.
British Airways, Reuters and Unilever will also report. "We're reasonably wary of the results. We might see some impact from the Far East - that'll result in downgrades," said Gra- ham Campbell, a fund manager at Edinburgh Fund Managers.The FT-SE 100 closed at 5,629.70 on Friday, led by oil stocks. UK STOCKS may be mixed this week. Four of Britain's six biggest companies report earnings and investors will be looking to see if Asia's economic turmoil and the strong pound are hurting profits. This week, they lose the pension fund business of National Australia Bank, the owner of Yorkshire Bank and Clydesdale Bank, for which Gartmore and PDFM have controlled an equity fund valued at pounds 800m; PDFM lost a pounds 1bn contract at Railpen, the railway employees' pension fund, a few days after UBS and Swiss Bank Corporation announced they were merging.Several local authorities, including the four London boroughs of Ealing, Richmond, Bromley and Tower Hamlets, are also reviewing their contracts with the two companies.Copyright: IOS & Bloomberg.
In 1997, the FT-SE 100 jumped 24 per cent to 5,040, against expectations at the end of 1996 of a 5-7 per cent climb.Some investors are getting restless as a result of fund managers taking too cautious a stance on the market. There were reports last week that pension fund managers Gartmore and PDFM, which is owned by UBS, have lost mandates with a combined value of at least pounds 2bn since the autumn, as clients have lost patience with their managers' pessimistic views.The two fund managers, which together control more than pounds 90bn of pension fund money, have taken large cash positions, in the belief that stocks are heading for a downturn. UBS last raised its target to 6,300 in early January from 5,600 in December.This is not the first year in which analysts have been wrong-footed by the movement in the market. Morgan Stanley, Dean Witter, Discover & Company also held their 6,000 prediction while Societe Generale Strauss Turnbull maintained its 5,350 year-end target.