UBS chief calls bottom of bear market

One of Europe's largest investment banks declared yesterday that the bear market that has gripped the world for more than three years was at an end. But UBS held back from calling the start of a bull market, instead forecasting several more quarters of bumpy trading.

Peter Wuffli, the UBS group president, said the worst market downturn in a generation may be over. "There are a number of signals that smell like the end of the bear market but that isn't yet the start of the bull market," he told journalists.

His remarks were well received in the market as they came from a bank with a reputation for taking a bearish stance. Mr Wuffli added: "I would not exclude at all that there will be further quarters with falling equity values, but we do not expect the rhythm of earnings declines will continue."

Mr Wuffli's optimism was echoed by the head of DWS Investments, the fund management arm of Deutsche Bank. Klaus Kaldemorgen, its head of equities, said European and US markets would rise this year, with German, French and Spanish indices recording the biggest gains. "The storm on equity markets is over, particularly here in Europe," he told Bloomberg News.

Mr Kaldemorgen said Europe would outperform the US because prices in general were some 20 per cent cheaper on this side of the Atlantic. "That has to be corrected, and that's why the European market will outperform over the rest of the year," he said.

Meanwhile, a survey of fund managers by Merrill Lynch found that six out of 10 expected the world economy to grow over the next 12 months compared with 45 per cent last month. Almost half said the markets were fairly valued, compared with 36 per cent seeing them as undervalued and 15 per cent overvalued.

David Bowers, global investment strategist at Merrill Lynch, said: "It may look as though good things are happening but the fundamental long-term issues haven't gone away. The real economic data for the next three months will be absolutely critical."