SHARES across Europe weakened yesterday as investors focused on interest rates and fears that shares may be overvalued.
News that investment guru Mr Warren Buffet said in his annual letter to shareholders of Berkshire Hathaway, the company he chairs, that he believed most stocks were overvalued, also weighed on share prices.
As a result, the Dow Jones index fell 81 points, however it recovered somewhat before close of, business to end up 20.02 points.
The overpayment risk surfaces periodically and, in our opinion, may now be quite high for the purchasers of nearly all stocks," Mr Buffet was quoted by the New York Times as saying in a letter to shareholders.
Investors making purchases in an overheated market need to recognise that it may often take an extended period for the value of even an outstanding company to catch up with the price they paid."
The paper said Mr Buffett indicated that, while some stocks Berkshire held might be considered overvalued, he had no intention of selling them.
European markets fell after the comments as a weakening dollar ate away at investor optimism engendered by Wall Street's rally on Friday. The dollar lost a pfennig with traders anxiously awaiting a batch of German figures this week. The data could signal returning strength to the German economy, which would be good news for the deutschmark against the dollar.
The British market was little moved initially by the government's announcement of a May 1st election, but analysts said attention was likely to focus in the coming weeks on the lengthy election campaign and opinion polls.
Strategists said the markets should already have discounted the polls and a likely win for the opposition Labour party, but added that a short term fall was still on the cards.
However, it was the Italian equity and bond markets which suffered most. Italian bond prices are taking a hammering as investors are seized by doubts over Italy's chances of restoring its state finances to health in time to secure a place in a European currency union planned for 1999.
