It’s a new era for Europeans who for eight years got accustomed to watching companies with the worst balance sheets do nothing but rally. Now those stocks are getting crushed by rising bond yields, a trend strategists see continuing.

Investors are pinning their hopes on another good year for the FTSE 100 Index in 2007, buoyed by fresh takeover activity and higher commodity prices.

Investors in the London stock market were hoping for another bullish year today after a strong rally in 2005 saw the FTSE 100 Index rise 16.7% and shares outperform house prices for the first time since 1999.

A WAVE of more upbeat company results and economic data have stoked a summer surge in British share prices and should keep them on the rise in the coming months — albeit at a less sizzling pace.