News Column

FTSE closing in on record high

May 14, 2014

By Hugo Duncan, Daily Mail, London



May 14--Shares in London hit their highest level for nearly 15 years last night on a bumper day for investors around the world.

The FTSE 100 index of blue-chip stocks rose 21.33 points to 6,873.08 the second best close on record and less than 60 points off the all-time high of 6,930 at the end of December 1999.

Mid-cap stocks were also on the rise with the FTSE 250 up 57.54 to 16,038.89, although this was still some way short of its February 2014 peak of 16,728.

The gains in London were echoed in the United States and Europe as stock markets on both sides of the Atlantic clocked up multi-year highs.

The S&P 500 rose above 1,900 for the first time in early trading in New York while the Dow Jones Industrial Average built on its record close the previous night.

The FTSEurofirst 300 index of top European shares hit levels not seen since May 2008.

David Buik, a commentator at stock broker Panmure Gordon, welcomed the 'feel-good factor' sweeping the City of London and said UK stocks are within 'striking distance' of their all-time high.

'The feverish wave of M&A activity should see this landmark eclipsed before too long,' he said, referring to potential deals involving AstraZeneca, Dixons and Carphone Warehouse, and BSkyB.

Housebuilders led the way yesterday after Taylor Wimpey raised its profits forecasts on the back of the booming housing market. Chief executive Pete Redfern unveiled 'a new and enhanced set of financial targets' for 2015 to 2017 including higher operating margins.

Shares jumped 7.6pc or 8.1p to 114.4p making it the biggest riser in the FTSE 350. It was followed by blue-chip rivals Persimmon (up 44p to 1404p) and Barratt Developments (up 12p to 386.3p).

'The booming UK housing market continues to be strong indeed with improving confidence in that sector,' said Henk Potts, a strategist at Barclays Wealth and Investment Management. 'Expectations of the housing market are that demand will be strong for some time.'

Global investors brushed off the turmoil in Ukraine as well as disappointing economic data in the US, China and Germany amid hopes that central banks around the world will step in to support growth.

US retail sales increased by just 0.1pc in April while industrial output in China rose by a weaker-than-expected 8.7pc and sentiment in Germany fell for a fifth month in a row.

Although the US Federal Reserve is winding down its programme of quantitative easing, it has indicated that an interest rate hike remains a long way off. European Central Bank president Mario Draghi has hinted that he will act next month to stimulate the eurozone economy and stave off a dangerous bout of deflation.

It is also hoped that Beijing will step in to bolster output in China amid signs the world's second largest economy is slowing down.

But Michael Hewson, an analyst at CMC Markets, said: 'Rightly or wrongly, investors think that Chinese authorities will take steps to shore up the economy, the expectations are that the European Central Bank will do something next month and the US Federal Reserve will keep interest rates low while it tapers quantitative easing. My concern is that some of those look optimistic.'

Sterling rose as high as euro 1.2292 against the single currency a level not seen since January last year on speculation that interest rates will rise in the UK far sooner than in the eurozone. The pound has also risen by around 14pc against the US dollar since July last year, hitting a five-year high of nearly $1.70 earlier this month.

The Bank of England is today expected to raise its growth forecasts for the economy once again paving the way for a rate rise within the next 12 months.

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Source: Daily Mail (London, England)