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Shares rise on renewed optimism

2009-09-16 04:55:50

European and Asian shares have risen strongly, buoyed by US stocks closing at their highest level so far in 2009 overnight on Wall Street.

Lifted by the latest signs of economic recovery in the US, the UK's FTSE 100 index was up 0.8% in early trading, while Japan's Nikkei ended up 0.5%.

The rises came after America's Dow Jones index closed Tuesday up 0.6%, to its highest level since October 2008.

Investor sentiment was boosted by a big rise in US retail sales in August.

I think investors should sort of catch themselves now and not get over-confident

Gregg Fisher, Gerstein Fisher

Confidence was further increased by comments from Federal Reserve chairman Ben Bernanke, who said the US economy was now "very likely over".

The FTSE's rise was mirrored across Europe, where Germany's Dax had added 0.7% and France's Cac was up 1%.

The main Australian share index had earlier closed up 2.2%, while Hong Kong's Hang Seng added 1.8% and India's Sensex had advanced 1.1% in afternoon exchanges.

Cautious note

Official data showing that US retail sales rose 2.7% in August was warmly welcomed by the markets, because consumer spending is central to the US economy, accounting for more than two-thirds of US economic activity.

While the big rise was helped by the US "cash for clunkers" car scrappage scheme, which has now ended, retail sales excluding cars also increased by 1.1%, beating market expectations of a 0.4% gain.

However, despite the share rises, Mr Benanke warned that the US economy still faced some hurdles before it could exit recession.

"It's still going to feel like a very weak economy for some time," he said.

This cautious note was mirrored by a number of analysts.

"Investors are always following the herd," said Gregg Fisher, chief investment officer at financial advisory firm Gerstein Fisher.

"I think investors should sort of catch themselves now and not get over-confident."