Good news sparks stockmarket rally
The FTSE 100 hit 4771 points in late-morning trading, its highest point since the beginning of October last year and a vast improvement from the dismal lows of March.
The stockmarket index of the UK's 100 largest companies is now up 30% from the start of the year and has recovered from the near 3500 low seen just five months ago. And experts say the FTSE 100 rally still has plenty of life left in it after the index hit 10-month highs earlier today.
In recent weeks investors have been buoyed by a stream of positive economic data hinting that the worst is very much over for struggling industrialised nations. Earlier today, France and Germany saw their economies make a surprise return to growth after a year of recession, while more upbeat comments from the Federal Reserve propelled US shares higher last night.
Sarah Arkle, chief investment officer at Threadneedle, points to a number of influences that have taken the markets forward. "Equity markets have enjoyed a strong rally following the pick-up in economic sentiment, improved newsflow from the banking sector and better-than-anticipated second-quarter corporate results from around the globe," she says.
Commodity prices have also helped drive progress on the markets, with copper in particular performing well to push on miners' shares.
In recent days, copper reached a 10-month high, with oil prices also jumping 1.5% on the back of a forecast from the International Energy Agency that global demand will grow 1.5% in 2010.
That said, the price of oil remains considerably lower than last summer's historical high of $147 per barrel.
However, Arkle doesn’t rule out a correction in the near-term: "We would expect much slower progress from here, with risks of some negative news on economic growth or from early signs of stimulus withdrawals. Either of these could have a negative short-term impact."
A market-weighted index of the 100 biggest companies by market capitalisation listed on the London Stock Exchange. It is often referred to as “The Footsie”. The index began on 3 January 1984 with a base level of 1000; the highest value reached to date is 6950.6, on 30 December 1999. The index is “weighted” by how the movements of each of the 100 constituents affect the index, so larger companies make more of a difference to the index than smaller ones. To ensure it is a true and accurate representation of the most highly capitalised companies in the UK, just like football’s Premier League, every three months the FTSE 100 “relegates” the bottom three companies in the 100 whose market capitalisation has fallen and “promotes” to the index the three companies whose market capitalisation has grown sufficiently to warrant inclusion. Around 80% of the companies listed on the London Stock Exchange are included in the FTSE 100.