The data showed that America’s unemployment rate fell to 5.6 per cent in January and is now at its lowest level since President George Bush took office.ITV was held back by a downgrade from Goldman Sachs. The FTSE 100 index rose 18.3 points to 4,402.7 as investors were excited by US employment figures. Traditionally, the Icelandic bank Kaupthing Bunadarbanki, which owns 9.4 per cent of S&F, has been seen as the most likely suitor, but yesterday dealers talked of a bid for the company from Old Mutual, the South African financial services giant. Another perennial takeover story, that of a bid for the merchant bank Singer & Friedlander, was back again It pushed S&F 11.25p higher to 227p. Analysts argued that Mr von Spreckelsen and Mr Williams would have been prohibited by FSA rules from completing their share sales so close to a planned acquisition. Bill Williams, an executive at the group, carried out a similar share transaction on the same day. On 23 January, John von Spreckelsen, Somerfield’s chairman, exercised 2 million share options at 69p and sold a chunk of the resulting stock at 151.25p.

An unlikely tale circled Woolworths yesterday and although analysts were quick to dismiss it outright it certainly got shares in the retailer moving. Woolworths closed 2.25p higher at 42.75p as market professionals reported talk that the supermarket operator Somerfield was preparing a bid for the pick’n'mix to toys retailer. Why Somerfield would want to move away from food retailing was not adequately explained by those repeating the rumour, while analysts noted there is a technical reason that such a move by the supermarket group is out of the question in the near term. The present profligacy in Government spending around the world will eventually be paid for by printing more money, which will lift inflation and interest rates. The message is: steer clear of debt, even forms of it as reliable as gilts.. For gilts to go much higher from current levels requires another fall in already low, inflationary expectations That doesn’t to me look like the way to bet. But long run returns for gilts are also much flatter than equities, or looked at another way, if there were no return on gilts at all in future, they would take 72 years to return to their long-run trend, whereas from the peak of the market for shares, the same adjustment for equities would have taken only 15 years.All this may sound like a complicated way of stating the obvious, yet it is sometimes reassuring to have the obvious confirmed by the analysis.

All it did was return equities to their long-run trend for real rates of return. With the recovery in equity prices over the past year, they are once more running a little above trend.Yet this doesn’t necessarily make them poor value. According to the CSFB study, equities are showing a 20 per cent deviation from trend right now, but gilts are way up there at 60 per cent. At the height of the bull market, equities were 80 per cent above trend, so the overvaluation in gilts may not seem as extreme as was achieved for equities. If you thought the bear market of 2000-2003 was bad, be warned.

The uncertainty of corporate earnings make equities inherently more risky and volatile than gilts, which at least always repay the initial capital. £100 invested in equities in 1869 becomes worth £331,826, against just £1,018 for gilts.On any kind of a long-term basis then, equities always far and away outperform gilts, if only because companies are much better adapted to prolonged bouts of inflation – they can raise their prices – than bonds, whose value is destroyed by them.However, no one alive today could have invested as far back as 1869, and as most of us have discovered to our cost in the past four years, over shorter time scales equities are a lot less reliable. Even adjusting for inflation, the findings are equally eye opening. An investment of £100 in equities in 1869 would today be worth £14.9m, whereas a similar amount invested in British Government bonds would be worth only £45,747, or about the same as the cash equivalent. Credit Suisse is the proud keeper of records dating back to 1869 on gilt and equity returns.