By Phillip Wong

Share prices, mid-way through the final quarter of the year, are managing to stay in touch with recent highs despite some mixed news on economic recovery.

The Dow Jones Industrial Average and S&P 500 indices in the USA stand at all-time highs, Japanese shares are building on the big gains seen so far this year and in the UK medium seized and small company indices have hit record high points and the FTSE 100 is close to the peaks seen at the end of 1999. Some economic news has been disappointing though: in Europe the German economy looks to have lost momentum in the third quarter and France has unexpectedly contracted suggesting that the region’s recovery is flagging and still struggling with the legacy of its debt crisis. In the USA, gross domestic product is growing at a yearly rate of 2.8 per cent based on the last quarter’s data against a median forecast of two per cent, though that good news was offset by news that consumer spending looked to be tailing off. Markets were surprised by comments from Janet Yellens, the income Federal Reserve chairperson: in her first big policy statement she said that the economy and the labour market were performing well short of their potential and must improve before the central bank can begin reducing their monetary stimulus. Analysts have been quick to point out that the ‘Fed’s comments on the US economy suggests that the bank’s stimulus programme will stay intact for a few months yet keeping interest rates at low levels in the process. That should help underpin share prices in what is a traditionally good quarter for equities.

Sentiment is also being helped by company results which show that, in many cases, low interest rates and a ceiling on wage growth are helping to keep profits ahead of expectations. An increase in the levels of merger and acquisition activity is a sign of investor confidence.Finally, stock market filings indicated that members of Morrisons’ founding family had lifted their holding in the group, although this was in fact related to trustee changes.