Last week’s index trading drew to a very exciting close as the seemingly unstoppable FTSE 100 continued to surge in value as investor confidence grew in the continuity of British big business.
The FTSE 100, which is a share index featuring the most prestigious and stable publicly listed companies on the London Stock Exchange, rose to a 1-year high of 7,542 at close of business on Friday, January 14 which is quite an achievement given that the FTSE 100 index has been performing very well throughout the latter part of 2021.
Whilst homebuilders had been bolstering the value of the overall FTSE 100 group, this week the baton has been handed to energy and utility companies such as Severn Trent and National Grid which helped take the FTSE 100 to new heights.
A one-year high point at a time of market volatility among publicly listed companies may well be interesting in its own right, however there is more to it than just confidence in a few traditional industries from within which a handful of big players are included in the FTSE 100 index.
When comparing the performance of the FTSE 100 index to that of its blue-chip European counterparts, there is a distinct differential. The French CAC 40 index has demonstrated a series of upward and downward movements during the course of the past week, and closed on Friday at 7,143 which is down 1.41% over the course of the trading week, and Germany’s DAX index is down to 15,883 which is a decline of 0.77% over the past five days until Friday, January 14.
When looking at the different direction between that of London’s blue-chip index and Europe’s most important indices, it is clear that confidence in the growth of the large corporations in an unrestricted United Kingdom is now very high, especially after the revellations in the newspapers relating to parties having been held by senior government officials during the lockdowns and social distancing restrictions that had been mandated for business and personal activities, thwarting any potential further plans for restrictions in Britain.
Meanwhile, there are a number of rules still in place in Europe which could affect business. Therefore, whilst European governments continue to keep invoking different sets of restrictions such as quarantines on arrival for certain travellers, and until just a few days ago, an outright ban on entry to France for British residents.
Germany imposed a lockdown on part of its population in December, and whilst these events appear unrelated to the markets, they are absolutely relevant.
Large companies whose stock is listed on major exchanges and rated highly enough to be considered blue-chip often provide services or products to large percentages of national populations, therefore if those customers either are not allowed to participate in the market by being subject to restrictions, or business cannot function as normal due to travel or logistical restrictions, a sizeable dent is very likely to be made.
Conversely, in Britain, there are no restrictions and the market is wide open, with every business free to operate as normal. Whether the revellations about the parties at Downing Street have been enough to stave off the introduction of similar restrictions to those in parts of Europe is perhaps a matter for debate, but the end result is that there is no over-reaching long arm of the state interfering in the ability to generate revenue for any business, large or small, in Britain and perhaps that is why confidence in the FTSE 100 is so high these days.
Over 7,500 points is quite an achievement for the FTSE 100 index. Last year, when it pushed ahead of the 7,000 mark, it was big news and that was during the period in which semi-conductor shortages were impeding large manufacturers and prolonging the delivery of completed products. It was, however, during the ‘stamp duty holiday’ period, in which house buyers in Britain could purchase a property with a value of up to £500,000 and pay no purchase tax which resulted in the large FTSE 100-listed construction companies’ stock rising substantially in value.
Now, they still do well even though the dreaded stamp duty is back in force, and new homes are selling like hot cakes across the United Kingdom – in fact so are old ones! The property market is very hot right now which is another interesting situation demonstrating confidence in the economy going forward.
However, the big miners, energy providers and utility companies are bolstering Britain’s top index, along with recovering interest in hospitality, airlines and tech firms.
Sentiment is valuable, and in this very interesting beginning to the week, it appears that investors are backing Britain and backing a free, uninhibited economy as the power of the public is greater than the potential ability of the state to bring in any arbitrary or business-unfriendly restrictions.
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