The FTSE 100 Report

FTSE 100: If the forecasters are to be believed investors should ready for gains

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Category: The FTSE 100 Report

Published on Tuesday, 03 January 2012 10:29

Written by Will Peters

Only Morgan Stanley predicts that the FTSE will finish the year lower than its starting point of 5,572.28.

The FTSE 100 (INDEXFTSE:UKX) is 1.18% higher on the day at 5,637.79 at 10:25AM in London.

The FTSE 100 will shrug off the continuing economic malaise to rebound by almost 8% in 2012, according to the average forecasts of ten leading market commentators surveyed by The Times.




Such gains, expected to be driven by investors’ appetite for undervalued stocks and international exposure, would mean that London’s blue-chip index would regain all the ground lost during the past year amid the turmoil of the European sovereign debt crisis.

Only Morgan Stanley, at 5,000 points, predicts that the FTSE will finish the year lower than its starting point of 5,572.28.

Most analysts are targeting a move above the 6,000 level.

However, investors should not be too enthusiastic about the largely bullish forecasts, given that every analyst polled last year by The Times was far too optimistic, with an average of 6,560 for the end of 2011 — nearly 988 points too high. They had counted on a raft of M&A deals that never materialised.

"2012 has got off to a flyer with the FTSE recouping almost half of its annual losses on the first day of trading!  Yesterday a few European indices such as the Dax and Cac were open and they started the New Year with aplomb, being boosted by stronger than expected manufacturing data across the continent and overnight indices have been boosted further by a good Chinese PMI number to kick things off.  Buyers have piled into mining stocks this morning as a bout of increased risk appetite sweeps through the markets as the FTSE plays catch up," says Simon Denham at spread betting company Capital Spreads.

That said, those who have read many of the headlines in the papers this morning will be forgiven for thinking that the start to the year would be on a down note as report after report says that people in the UK are expecting more than before for the economy to dip back into recession. 

Confidence remains beaten up and the high street has suffered further blows with retailers under pressure.
 
Even though the PMI data released across Europe yesterday was on the whole better than expected, it still remains well below the 50 level suggesting contraction and a recession across the continent is possibly even underway as I write.