HEXUS.sharewatch: share rally enters its fourth week

Even the now famous BBC business correspondent, Robert Peston, has dared to suggest that there are some positive signs emerging in the world economy. However he, like us, hedges any such observations with warnings that things could still get worse before they get better.

At the core of any optimistic statements these days is the circular interdependence of asset prices, credit and confidence. Banks are reluctant to lend against assets that might lose their value. This lack of credit is preventing business and investment from happening and the resulting low levels of confidence contribute to the fall in asset prices.

This Catch 22 situation could have the opposite effect once one of the three factors above start to show signs of improvement; things could start to snowball in a positive direction. But then again, they might not.

This is the fourth week in a row we have observed an improvement in share prices across the board. Among the bigger gainers are Apple, IBM and NVIDIA but, apart from acquisition rumours and a product launch, they seem to be among the beneficiaries of the most sustained rally in stock markets since the banking crisis started.