Dow hits new high

25 April 2008

The Dow achieved a series of all- time highs in October, peaking at 12236 points on 26 October. Its previous high of 11908 was set in January 2000, at the height of the speculative dot.com era.

The Dow doesn't necessarily say a lot about the general state of the stock market, composed as it is of just 30 companies. But it still carries huge weight, partly for historical reasons - the Dow has been going since 1896 - and because it is composed of some of the most widely-held stocks in the world - household names like Boeing, Coca-Cola, General Motors, Hewlett Packard and Microsoft, to name just five.

So while indexes like the S&P 500 - which is still about 15% off its all-time high - are arguably more useful, it is still the Dow that many get excited about.

The driving force behind this rise was the continued fall in oil prices, which is something of a double whammy of good news. First, it means that energy and transport prices should fall in the short-term, second, it helps reduce the threat of inflation and, therefore, interest rate rises.

Crane shares

The lifting industry was pulled along by the markets' general buoyancy, with the IC Share Index moving up 10.89% to 441.45 points. This was still a little short of the all-time high of 461.26 points, set in mid-May, but was still a useful gain compared to the 4.81% rise for the Dow, 4.78% gain for the FTSE and 5.06% improvement in the Topix 500, seen over the week 37 - 42 period.

Terex was the stand-out company among crane manufacturers, with its impressive third quarter results helping its shares to a 22.9% rise. Indeed, like the Dow, Terex's shares hit a new record of US$56.54 in October.

There were good performances elsewhere in the sector too, with both European manufacturers seeing double-digit gains, and Manitowoc moving up 8.85%. Hitachi also did well with its 10.73% climb, but the other Japanese manufacturers disappointed - Kobe Steel was flat and Tadano lost 3.84%.

Outlook

Despite good profits and strong profitability in the crane sector, there could be some dark clouds on the horizon. Caterpillar, the world's largest construction equipment manufacturer, used its Q3 results announcement to say the current cycle of growth was more or less over. After several years of double-digit revenue gains, Cat sees its business growing by between just 0 to 5% this year. A slowdown in the US economy in general, and house building in particular, are the main worries for Cat.

It remains to be seen whether the crane industry will be affected by the same drivers. One would hope not and there is good reason to be optimistic. House building is certainly looking shaky in the US, but this sector is not a major crane market.

Another point in the crane sector's favour is that backlogs still seem to be getting longer. Terex Cranes had a backlog of more than US$1 billion at the end of Q3 - equivalent to about seven months' production - so, on that basis, it should still be sitting pretty well into Q2 2007. •

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