Investors return

Global markets soar on trade deal prospects and stability

City of London

Markets have enjoyed new highs (pic: Terry Murden)

Britain’s blue-chip stock market index – the FTSE 100 – enjoyed its best performance for three years, up 12% as investors returned to equities after Boris Johnson’s general election victory.

The index closed at 7,542 points, against 6,728 a year ago as investors around the world appeared to shrug off any talk of recession and grew confident of an early trade deal between the US and China.

President Donald Trump wrote in a tweet that the Phase 1 agreement with China would be signed on 15 January at the White House and that he would later travel to Beijing to begin negotiations on the next phase.

The statement put the S&P 500 index on track for its best year since 2013 and the second-best year in two decades as global stock markets posted their best year since the financial crisis a decade ago.

The FTSE 100 closed Tuesday’s truncated session 0.59% lower but has risen by 370 points, or 5% since the General Election which produced a majority government and signalled a decisive moment in the Brexit debate. Banks and housebuilders are among the domestic stocks to have benefited from the so-called Boris Bounce.

The blue chip index is now just 5% off its record high, 7,903 points, set in May 2018 with the likelihood that, barring any major shocks, it will push through 8,000 in the first quarter of 2020.

John Moore, senior investment manager at wealth management firm Brewin Dolphin, said: “The ingredients are there for the FTSE 100 to hit a new high. In comparative terms, UK companies look undervalued and the reasons for not owning UK assets are starting to dissipate.

“That could precipitate a return to UK equities for investors who previously sold them off.”

There are good reasons to believe the main UK market can hit a new high in 2020

– John Moore, Brewin Dolphin

He noted that while there has been some volatility and a couple of new index highs, the FTSE 100 is more or less where it was two years ago. Meanwhile, the S+P 500 sits in record territory and it is a similar story for other markets.

“It may not be immediate, but with greater political certainty there are good reasons to believe the main UK market can hit a new high in 2020. Whether it will hit 8,000 points, as some have suggested, is another question. That could begin to look like an adrenaline rush, rather than the steady uplift the market would want,” said Mr Moore.

The S&P 500 index of top US companies is 28% higher, marking a series of record highs on the back of Donald Trump’s tax cuts, share buybacks and optimism about US growth prospects.

France’s CAC 40 ended the day down 0.07%, but is up 25% over the year along with Germany’s Dax. In Asia Japan’s Nikkei gained 18%.

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