Wall Street and City stock markets on upward trajectory Wall Street, New York, which like the City, in Britain, was reflecting optimism yesterday. Photograph: Cameron Davidson/Corbis Stock markets rallied on both sides of the Atlantic yesterday, continuing their strong start to 2013 and pushing the S&P 500 index - the broadest barometer of Wall Street - through 1,500 for the first time since December 2007. At the same time, the FTSE 100 index reached levels it last traded at in May 2008, despite economists forecasting a contraction in the UK economy in the fourth quarter of 2012 of 0.1% - a sharp contrast to the near 1% rise in the third quarter - when official data is released this morning. If the forecasts are correct and the economy is again in decline, the UK will be halfway towards an unprecedented triple-dip recession. Louise Cooper, an independent analyst, said the rally on stock markets was the result of continued intervention by central banks to buy up government bonds through quantitative easing. "It distorts markets, because if you're an investor, where else are you going to put your money?" she said, explaining that stock markets were benefiting as investors searched for higher returns. QE is distorting asset prices. The medicine is as damaging as the initial illness. Rupert Baker, a European equity sales executive at Mirabaud Securities, told Reuters that investors were looking at shares for potential dividends. People want to see the glass half full. There's a lot of cash around not earning very much money, and some of that has to go into equities," Baker said. But stock markets are shrugging off fears of a new economic downturn in the UK. Stock markets in other parts of Europe were also treasuring hopes that Germany, crucial to the eurozone region, was able to sustain economic growth and that the crisis that gripped the eurozone during 2012 was abating, for now. The FTSE was given an extra injection of upward momentum by rumours that the GDP data, due for release at 9.30am, had been leaked and were better than expected. The blue chip index ended just over 1% higher at 6,264.91, a gain of 67 points. In just three weeks, the FTSE 100 has achieved gains of just of over 6% - as large as those registered during the whole of 2012. On the other side of the Atlantic, the S&P gave back some of the gains its made to fall back below the 1,500 barrier in afternoon trading, and the US technology index, Nasdaq, was dragged lower when shares in Apple - which released disappointing results on Wednesday night - declined by 10%, wiping $50bn off the value of the most valuable stock market company in the US. That mantle could soon be handed back to ExxonMobil if the slide continues. The closely watched Dow Jones industrial average was also higher, gaining 58.82 points to 13,838.15, after reaching a five-year high on Wednesday when rises at technology company IBM pulled the market through its highest levels since October 2007. The 10% plunge in Apple shares, which are now valued at $460, reduced the company's stock market value to $432bn and was caused by its report of flat profits on record quarterly revenue of $55bn. Apple shares hit a peak of $702 last September, but have since lost 35% of their value - wiping $225bn off the value of the business - as worries about whether the tech giant's days as a high-growth company are over. Yesterday's decline in the Apple price was its biggest single-day decline for four years. Apple sold 47.8m iPhones over the Christmas quarter, missing a forecast average of around 50m, which sparked the stock market rout. In Spain, the latest data showed that 6 million people were now out of work, with the unemployment rate rising, but claims for jobless benefits in the US hit a five-year low. Improved Chinese manufacturing data also helped sentiment. Quincy Krosby, a market strategist at Prudential Financial, said: "The Chinese data bodes well for demand, which translates into top-line revenue growth. If global demand goes up, it's good for US equities. "Leading economic indicators rose, new jobless claims are at the lowest level in many years, and Chinese manufacturing data moved to a positive trajectory," he added.