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Footsie 'to smash 5500 barrier' as London bounces back from disaster
Hugo Duncan and Mickey Clark11 Sep 2009
City analysts predicted today that the FT-100 Index would smash through the 5500 barrier as investors put the collapse of Lehman Brothers a year ago behind them.
The index of leading shares this week flew through the 5000 level on signs that the UK is pulling out of recession and the global economy is on the road to recovery.
Today, banking giant Credit Suisse predicted the Footsie would jump as high as 5600 by the middle of next year.
Mike Lenhoff, respected market strategist at City stockbroker Brewin Dolphin, takes a similar line. He is sticking with his year-end target of 5000 but says it could hit 5500.
"Equity markets want to run and, in the case of the FTSE 100, we could be talking about a move well into the 5000 to 5500 area within a few months," said Mr Lenhoff.
Until this week, the last time the FTSE-100 index saw 5000 was a year ago, days after Lehman Brothers collapsed on 15 September, tipping the global economy into recession.
It dropped as low as 3512 in March but has been on the rise ever since, driven by a steady drip-feed of good news.
There are signs the economy returned to growth in the current third quarter of the year (July, August and September) having suffered five quarters of decline since April 2008.
The worst of the housing slump appears to have passed, sales on the high street are surprisingly robust, and although jobs are still being cut, some firms in London and even in the City are beginning to hire new staff.
Jonathan Loynes, chief European economist at Capital Economics, reckons gross domestic product in the UK will rise by one per cent next year, up from his previous forecast of 0.5 per cent.
"The recent improvement in the tone of the domestic economic data and some upward revisions to our global economic forecasts have led us to nudge our forecasts for UK GDP growth in 2010 a bit higher," he said.
London's business community was braced for catastrophe amid fears of thousands of redundancies as Lehman went bust and Merrill Lynch was rescued by rival Bank Of America.
The London housing market was thrown into paralysis by the events of last September.
Prices of luxury homes fell 15 per cent in the five months following the Lehman's collapse but have since gained 4.7 per cent, including a 1 per cent leap during August. That marked the fastest pace of price rises since 2007.
Peter Rollings, managing director of Marsh & Parsons estate agency, said: "Lehman Brothers was like a nuclear bomb going off.
"For three months it was disastrous. Terrifying. No buyers, no sellers. I was practically suicidal at the time. I thought, 'That's it. We're screwed'.
"But after Christmas it started to pick up and now we're getting busy again. In August we had 960 new applicants - double last August's numbers. We're really in recovery mode now."
Having axed nearly 70 staff after the Lehman collapsed, he is now hiring again.
James Hyman, head of residential sales at Cluttons estate agency said: "September 15 was the nail in the coffin of London's property market.
For anybody not sure whether to buy a property after the collapse of Northern Rock and the weakening economy, Lehman Brothers finally made up their mind.
"But now the market has done an incredible U-turn. Since January, you are seeing a 15 per cent to 20 per cent uplift.
Prices have probably now plateaued for the next six months but we will see lots more properties coming on to the central London market."
The leisure industry has also seen a recovery. Clive Watson, chief executive of the Capital Pub Co, London's biggest independent pub operator, said: "I'll never forget 15 September. I thought it was going to be financial meltdown.
"But fortunately we never had that disaster scenario. Our customers still came in and we're trading well."
Andy Cosslett, chief executive of the InterContinental hotel group, said: "Lehman's day signalled the start of the worst trading period the hotel industry has ever seen. The impact was almost instantaneous.
"However, the good news is our hotels in London have been more resilient than in other parts of the world."
But some City experts warn this may still turn be a short-lived jump in what remains a fundamentally weak stock market.
Reader views (13)
Just to liven things up why doesn't Keith list the countries that are comparable i.e. large EU states that have been hit harder then the UK. This would be far more interesting than his usual babble....
- Mark, London, UK, 11/09/2009 14:51
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if the Uk meets the growth levels that Darling forecast and was so criticised for...will this be a case of 'this is a false dawn' or will the current Govt receive any credit for the actions taken......it is difficult to really criticise the macro economic response from the Govt in response, though many can criticise the failings that did not protect us before. However there is only one party that can say 'I told you so' and that's the Libs
- Martin_Clerkenwell, london, 11/09/2009 14:24
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Will we ever learn? This is just another bubble waiting to go pop. With shares priced over 20x their earnings FTSE100 club is being held up by Gordon's print and spend policy. It will end as dramatically as it began.
- Wallytrader, London, 11/09/2009 14:20
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Funny how the Tories said cutting VAT from 17.5% to 15% was tinkering at the edges and thus a complete waste of time, now they claim reversing this will damage the recovery.
Do the Tories have anything other than short-term kneejerks to offer?
- Amanda, London, 11/09/2009 14:18
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I look forward to the General Election, when the Great British Public will be faced with a real choice,of electing a Tory,Tory,or Tory Government. Some choice?
- Ian Brandling, St Johns Wood, 11/09/2009 13:10
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Dead cat bounce. Rates are at 0.5%. Commodities prices soaring. Footsie is being driven by a small sector of its component parts. Companies have been improving bottom line by cutting costs not increasing revenues. BOE is printing money to buy its own debt.
Fundamentals are still pretty dire for the most part. House prices are still too high and lending is still non existent.
Gordon Brown is a rank incompetent who is unfit to run a burger van let alone the country.
- Dr Whooligan,, London, 11/09/2009 12:33
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Keith,
do you have any evidence that the recession has hit other countries far harder than us? further, any evidence that this might be down to G Brown?
you do have a history of pants being on fire.
- Scotty, london, 11/09/2009 12:01
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It is good we are all looking for optimistic signs. The weight of international investors is fuelling the commercial market (and Central London Resi) as they think it offers good value coupled with the exchange rate, and that a change of government will bring improvement. Their only concern is the state of the economy and how long the country will be saddled with the debt this Government has left us with!
- Andrew,, London, England, 11/09/2009 10:44
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"Well done Gordon Brown for rescuing the country from the worlwide economic recession, which has hit many other countries far harder than it has here in....".... New Labour's cellophane version of FANTASY ISLAND.
Can't wait for Black October, when the footsie lemmins do a reverse dive out of equities.
- Ted, London, 11/09/2009 10:42
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WHO WAS IN CHARGE OF OUR FINANCES FOR THE LAST TEN YEARS? WHO FAILED TO BACK MANUFACTURING INDUSTRY? WHO FAILED TO REGULATE BANKS? WHO ENCOURAGED STRONG BANKS TO MERGE WITH WEAK ONES? WHO HELPED GET US INTO TWO DISASTROUS WARS, WHICH WE COULD NOT AFFORD OR WIN? UNDER WHOS WATCH DID WE END UP WITH THE MOST UNEDUCATED WORK FORCE IN THE THE WESTERN WORLD?
WHO, WHO, WHO. ANSWERS ON A POST CARD TO EVERY VOTER.
- Alan Green, that was a fine old mess you got us into Stanley, sorry I mean Gordon., 11/09/2009 10:40
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The apparent "bounce back" of the FTSE 100 does not necessarily mean we are out of recession; I believe we have years of pain due to the excessive borrowing and therefore debt the UK has.
I do agree with Keith Price that GB has helped the City, but he has done nothing to help families in poverty, for example, by scrapping the 10% tax rate, by putting VAT back up at the end of this year, by making benefits difficult to claim etc etc.
Making cuts in public services to save money could have the opposite effect. What we need as a country more than anything now, are more jobs and more employed paying tax at a fair rate. I am not against the successful making the money they deserve, but I do know that over a certain salary, more tax should be paid to help drag us out of poverty. As a supposed rich nation it is disgusting that so many have so little.
- Rod, Epping, UK, 11/09/2009 10:28
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Usual rubbish from KP.
- David, Fleet UK, 11/09/2009 10:26
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Well done Gordon Brown for rescuing the country from the worldwide economic recession, which has hit many other countries far harder than it has us here in the UK
- Keith Price, Luton England, 11/09/2009 09:49
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