After an atrocious start to the year, the FTSE100 is finally fighting back.
January saw the FTSE 100 pummelled by worse-than-expected data from China and continued trouble in the oil sector. The stock market has also been affected by uncertainty over the upcoming European referendum, a large dip in mining (a sector that makes up an enormous part of the FTSE) and more gloomy indicators too numerous to mention.
The FTSE 100 closed yesterday at 6,362.89, up 1.93% from the start of the year, buoyed by an increase in commodity prices – good news for mining shares – and a rise in oil prices. Additionally, Chinese trade data was far better than expected (March exports in Yuan up 18.7% year-on-year).
However, this is global finance and the pendulum will always swing, and as Laith Khalaf, senior analyst at Hargreaves Lansdown, says: “There are still risks out there. China is continuing its transformation from a manufacturing-led economy to one focused on the consumer, the UK will shortly be going to the polls to decide whether to remain part of the EU, and central banks in the US and UK will at some point have to start raising interest rates.”
We would also add that with Chinese data, caution is advised concerning the trustworthiness of such figures.
Rebecca O'Keeffe, head of investment at stockbroker Interactive Investor says: “The current positive momentum in markets is predicated on cautious Federal Reserve policy and no imminent rate rises. Opinions at the Fed are somewhat divided on how gradual the path of rate normalization should be, with doves advocating two or fewer moves late this year, but hawks sticking to December's plan of four rate hikes. This divergence of views between various Fed members is an underlying worry, but markets are viewing it as more of a future problem rather than a current concern.”
- If you’d like to start investing this year, read How to invest in 2016: the basics.