'Insane' stock market rally starts to fizzle

Stocks have rallied over the past few weeks, but a sustainable recovery is hardly likely until the financial system has been sorted out.

Over the past few weeks, investors have "slipped on their rose-coloured glasses", says Alan Abelson in Barron's. US stocks have had their best six-week stretch since the 1930s, with the S&P up by 30% and the FTSE 100 gaining 17% by the end of last week, as economic data deteriorates at a slower pace. But as Nouriel Roubini of New York University, who predicted the crisis in 2006, points out, over the past two years the stockmarket has "predicted six out of the last zero economic recoveries".

A sustainable recovery is hardly likely until the financial system has been sorted out. Investors were brought back down to earth on Monday by bad news from Bank of America. "It hardly helps the great bank-recovery story when the US's biggest financial firm by assets comes out with ugly results," says Peter Eavis in The Wall Street Journal.

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