Shares dip amid worries rally at an end

Shares suffered profit-taking on Monday, after economic figures in the US and Japan failed to match expectations. In New York the closely-watched Dow Jones Industrial Average closed down two per cent after data on Friday showed weakness in high street sales and lower than expected consumer confidence. In Tokyo the Nikkei 225 Average fell, even after the country emerged from recession, as the level of growth failed to match expectations. And in Shanghai the exchange saw its biggest fall this year, slumping almost six per cent.

In the UK the FTSE 100 Index responded with a drop of 1.46 per cent, the biggest decline since July 2. The fall came as the oil price dropped and the value of the pound declined and with the markets up 50 per cent since their lows this year, it sparked concerns that the best of the recovery in share prices has been seen. Commodity prices have begun to fall, indicating that demand may be weakening after the initial recovery phase. Copper and oil prices dropped 2.7 per cent and gold suffered with a 1.5 per cent decline.

The declines came as the interbank lending rate, Libor, or the rate at which banks borrow from each other, fell to an all-time low, giving cause for hope that the credit crunch is at an end. It dropped to 0.75 per cent last night as market players anticipate the Bank of England lowering the rate it pays on reserves in an effort to get cash circulating through the financial system more widely.

WHAT THEY ARE SAYING:

Saxo Bank chief economist David Karsboel, in the Daily Telegraph

"Although we believe that stocks can go higher in the short term, we do feel that the current multiples don't incorporate the massive, macro economic imbalances that still exist. While consumers are finally deleveraging, fearing job loss and having no home equity, governments are taking over and continuing the debt issuance like there was no tomorrow."

David Morrison, market strategist at GFT Global, on Thisismoney.co.uk

"We seem to have been a bit spooked with the US consumer confidence figures and that has followed through into the Far East. The out-of-hours US markets as well have taken a bit of a battering. It all just feels like we're running out of steam (on the FTSE). We've had a great summer so far. The index might be taking a breather and pausing a bit or it might be the start of a realisation that we have really overcooked this." ·