London, Dec 30
Britain’s blue-chip FTSE 100 index looked set for a strong finish to 2016 on Friday after climbing to a record closing high in the previous session, although the pan-European STOXX 600 index was set for a slightly weaker ending. The FTSE 100 has gained 14 percent in 2016 to trade just below a record high set in October, making it the best performer among major European stock indexes despite the shock of June’s Brexit vote. The index, dominated by global firms, has been boosted by a sharp drop in sterling after the referendum and the resilience of the economy. “The latest GDP figures point to a strong UK economy which has probably accounted for some of the pick-up in equity prices overall since the referendum,” said Yael Selfin, head of macroeconomics at KPMG UK. “So far major UK stocks appear to have defied pre-referendum predictions … Most market watchers and participants agree this is thanks to the fall in sterling since 23 June as a number of the UK’s largest companies generate a large portion of their revenues in dollars,” KPMG said. Analysts said that the FTSE’s climb was also due to a strong rally in the mining sub-index, which has jumped 100 percent in 2016 on stronger metals prices and expectations that U.S. President-elect Donald Trump will keep his election pledge to boost infrastructure spending in the United States.
Shares in miner Anglo American have surged 285 percent in 2016, followed by a 205 percent jump in miner and trader Glencore and a 71 percent rise in global diversified miner BHP Billiton.
Miners also helped the European basic resources index to gain 60 percent this year, a bounce back after slumping 35 percent in the previous year.
The second half of the year also saw a sharp rebound in banking stocks as an improving global economic outlook, a rising U.S. interest rate environment and expectations of a lower level of regulation in the United States after Trump’s victory prompted investors to return to so called cyclical stocks.
The European banking index rose 12 percent in the third quarter and has surged 21 percent so far in the fourth quarter, after sinking 20 percent in the Jan-March period of 2016 and falling 13 percent in the second quarter.
The banking index, which fell around 35 percent in the first half to become the worst sector performer, is now down just about 7 percent for the year. The telecom sector has now fallen to the bottom of the list, with the index down more than 16 percent this year.
Across Europe, the STOXX Europe 600 index is down around 1.6 percent this year, reflecting political uncertainties in the region and concerns about the Italian banking industry.
Italy’s benchmark FTSE MIB is down around 10 percent, among the worst performers in Europe, following a 38 percent slump in Italian banks this year on lingering concerns about the sector’s health.
Germany’s DAX has risen 6.5 percent in 2016, while France’s CA is up 4 percent. However, Spain’s IBEX has fallen 2.5 percent.
On Friday, the STOXX 600, the FTSE 100, the DAX, the CAC and the IBEX were trading down between 0.1 percent and 0.3 percent. The UK stock market will close by midday on Friday.
London, Dec 30