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Sell into the rally. That is the advice coming out of Morgan Stanley, which today advised clients not to become too bullish because of the recent recovery in global equities.
The heavy-hitting broker said that it remains “in the tepid recovery camp”, warning that risks to growth have diminished rather than evaporated. It reckons that shares could face more than just a technical correction in the coming months.
Morgan Stanley's pointy-heads suggest investors should take note of both sides of the equation: looking at which shares to short as well as which to go long on.
Analysts also say that financial stocks will continue to set the direction for the market but that they will not be so volatile.
Shares in London ended their winning streak today after the past seven days witnessed their best run in four years. The benchmark FTSE 100 index dipped 5.86 points to 4475.31 despite late gains on Wall Street.
Volumes were exceptionally light in early trading in another slow summer day in the City.
Engineering components and car-parts maker GKN has received the backing from holders of 95.4% of its shares for its £423 million cash call.
Word in the City is that the rump of 39 million unwanted shares was placed in the market at 88½p this morning by JP Morgan Cazenove and UBS. GKN, which raised the money to cut its debts and claw market share from rivals, added 1½p to 90¼p.
The rights issue at pubs group Marston's proved a little less popular with investors — with 91% backing the £176 fundraising. The Pedigree brewer has come under fire for raising the money to fund expansion rather than shrink its £1.2 billion debt mountain. It dropped ½p at 91p.
Cadbury added to yesterday's gains with a rise of a penny to 555p after Panmure Gordon said that the maker of Dairy Milk chocolate could find a suitor in Kraft. The US food giant is said to be keen on growing its confectionery arm and Cadbury's strength in emerging markets may make it tempting to the company. The markets expressed their disappointment with BHP Billiton's production statement especially on iron ore output, sending its shares down 15½p to 1514½p. This combined with a weaker dollar to send the mining sector lower. Kazakhmys lost 10½p to 746 and Mexican silver miner Fresnillo was off 7p at 589p.
US markets endured a choppy session last night but a late rally pushed shares up to new highs for the year.
The Nasdaq rose for its 10th day in a row — the longest winning streak in 12 years.
Meanwhile, the Dow closed 67.79 higher at 8915.94 while the S&P 500 also hit a closing high for the year of 954.58 points, 0.4% higher.
Federal Reserve chairman Ben Bernanke's comments to a Congressional panel that rising unemployment, falling house prices and tight credit controls would weigh on consumer spending, led to early selling pressure in New York.
Bernanke also didn't say when the Fed would halt its quantitative easing programme, although he reassured investors somewhat by adding that the world's biggest economy was showing “tentative signs of stabilisation”.
Caterpillar, the heavy machinery maker, shot up 7.7% to $39.46 after its figures beat earnings expectations. But the company warned trading is tough and that it might sink into the red for the current quarter.
Apple, the iPhone and iPod maker, posted better-than-expected profit figures after the close of play and its shares jumped 3.4% in late trading.
Drugs giant Merck was another big winner after smashing earnings forecasts. Its shares rose 6.1% to $29.65.
Shares in Asia rose for a seventh day, pushed higher by material and electronics stocks, as optimism grew.
In Tokyo, Shin-Etsu Chemical, the world's largest silicon-wafer maker, surged 5.3% after announcing it will start talks with chipmakers to increase prices.
Traffic-signals maker Nippon Signal jumped 8.1% after a broker upgrade. The Nikkei 225 Average closed up 71.14 points at 9723.16.
The good results for Apple in America had a positive effect on Hon Hai Precision Industry, which puts together Apple's iPhone. Hon Hai's shares gained 2.7% in Taipei.
In Shanghai, China Petroleum & Chemical Corp rose 7.3% after broker Nomura said that the company's first-half income could more than triple.
