Bullish mood in City sends market up to 13-year high

Stimulus measures pushing down bond yields keep equities in demand

London’s leading share index closed at its highest level in almost 13 years yesterday, raising hopes that it will break through the 7,000 point barrier for the first time by the end of 2013.

The FTSE 100 reached 6,755.63 points after a choppy day of trading on the London Stock Exchange. This put it within touching distance of the 6,798.06 it reached on 4 September 2000, shortly after the height of the dot.com boom in the US.

Analysts said the rally was being driven by central bank intervention as well as low interest rates and falling yields on government debt. Chris Beauchamp, a market analyst at IG, said: “Economic data is getting better, and with no obvious crises on the horizon confidence is rising. The US budget crisis has gone away, and the markets even managed to shrug off concerns about Cyprus. The eurozone is not out of the woods yet, but investors are probably relieved to see the shift from relentless austerity to a more growth-focused policy.

“Central banks have also been pumping money into the economy, which has pushed down bond yields, resulting in a hunt for yield by income-seeking investors – particularly for companies that pay solid, reliable dividends. The hunt for income is driving renewed interest in the stock market, and with such big names as SABMiller, National Grid and Next boosting dividends this will continue to be an attractive destination.”

Experts will now watch closely to see whether the FTSE 100 can test its all-time closing high, the 6,930.20 it recorded on 30 December 1999. However, speaking yesterday they appeared to be split on how much further the markets would rise.

Nick Beecroft, the chairman of Saxo Capital Markets, said: “The new Bank of England Governor, Mark Carney, arrives in July and he has a reputation for innovation. The Bank’s mandate now allows it to aim for growth, rather than just inflation control, and one would expect Mr Carney to pursue the former enthusiastically.

“The US economy is ‘not too hot’ to make the Fed think about reducing its quantitative easing programme; meanwhile, the Bank of Japan has only just started a stimulus programme three times the Fed’s, which, in conjunction with ‘Abenomics’, has caused the Nikkei to soar by more than 70 per cent  since October.

“This is a sweet spot for equity markets, which look set to enjoy a vintage summer, and 7,000 is a realistic year-end target for the FTSE 100.”

Others were less optimistic, predicting a fall back to around 6,000 points.  Nick Lewis, director of trading at Capital Spreads, said: “Sometimes things seem like they are too good to be true because they are. The hype surrounding this year’s prolonged bull run is simply not backed up by economic hard data. It is highly likely that there will be a significant retracement in the second half of 2013 and the bears are sharpening their claws.”

Suggested Topics
Start your day with The Independent, sign up for daily news emails
Arts and Entertainment
Books should be for everyone, says Els, 8. Publisher Scholastic now agrees
booksAn eight-year-old saw a pirate book was ‘for boys’ and took on the publishers
Life and Style
Mary Beard received abuse after speaking positively on 'Question Time' about immigrant workers: 'When people say ridiculous, untrue and hurtful things, then I think you should call them out'
tech
Life and Style
Most mail-order brides are thought to come from Thailand, the Philippines and Romania
life
News
i100
Life and Style
tech
Voices
Margaret Thatcher, with her director of publicity Sir Gordon Reece, who helped her and the Tory Party to victory in 1979
voicesThe subject is being celebrated by the V&A museum, triggering some happy memories for former PR man DJ Taylor
ebooks
ebooksA special investigation by Andy McSmith
  • Get to the point
Latest stories from i100
Have you tried new the Independent Digital Edition apps?
Independent Dating
and  

By clicking 'Search' you
are agreeing to our
Terms of Use.

iJobs Job Widget
iJobs Money & Business

Ashdown Group: Business Analyst - Financial Services - City, London

£50000 - £55000 per annum: Ashdown Group: Business Analyst - Financial Service...

SThree: Trainee Recruitment Consultant

£18000 - £23000 per annum + OTE £45K: SThree: At SThree, we like to be differe...

SThree: Trainee Recruitment Consultant

£20000 - £25000 per annum + competitive: SThree: Did you know? SThree is the o...

Recruitment Genius: Administrator - IFA Based

£22000 - £24000 per annum: Recruitment Genius: This is an opportunity to join ...

Day In a Page

General Election 2015: Chuka Umunna on the benefits of immigration, humility – and his leader Ed Miliband

Chuka Umunna: A virus of racism runs through Ukip

The shadow business secretary on the benefits of immigration, humility – and his leader Ed Miliband
Yemen crisis: This exotic war will soon become Europe's problem

Yemen's exotic war will soon affect Europe

Terrorism and boatloads of desperate migrants will be the outcome of the Saudi air campaign, says Patrick Cockburn
Marginal Streets project aims to document voters in the run-up to the General Election

Marginal Streets project documents voters

Independent photographers Joseph Fox and Orlando Gili are uploading two portraits of constituents to their website for each day of the campaign
Game of Thrones: Visit the real-life kingdom of Westeros to see where violent history ends and telly tourism begins

The real-life kingdom of Westeros

Is there something a little uncomfortable about Game of Thrones shooting in Northern Ireland?
How to survive a social-media mauling, by the tough women of Twitter

How to survive a Twitter mauling

Mary Beard, Caroline Criado-Perez, Louise Mensch, Bunny La Roche and Courtney Barrasford reveal how to trounce the trolls
Gallipoli centenary: At dawn, the young remember the young who perished in one of the First World War's bloodiest battles

At dawn, the young remember the young

A century ago, soldiers of the Empire – many no more than boys – spilt on to Gallipoli’s beaches. On this 100th Anzac Day, there are personal, poetic tributes to their sacrifice
Dissent is slowly building against the billions spent on presidential campaigns – even among politicians themselves

Follow the money as never before

Dissent is slowly building against the billions spent on presidential campaigns – even among politicians themselves, reports Rupert Cornwell
Samuel West interview: The actor and director on austerity, unionisation, and not mentioning his famous parents

Samuel West interview

The actor and director on austerity, unionisation, and not mentioning his famous parents
General Election 2015: Imagine if the leading political parties were fashion labels

Imagine if the leading political parties were fashion labels

Fashion editor, Alexander Fury, on what the leaders' appearances tell us about them
Phumzile Mlambo-Ngcuka: Home can be the unsafest place for women

Phumzile Mlambo-Ngcuka: Home can be the unsafest place for women

The architect of the HeForShe movement and head of UN Women on the world's failure to combat domestic violence
Public relations as 'art'? Surely not

Confessions of a former PR man

The 'art' of public relations is being celebrated by the V&A museum, triggering some happy memories for DJ Taylor
Bill Granger recipes: Our chef succumbs to his sugar cravings with super-luxurious sweet treats

Bill Granger's luxurious sweet treats

Our chef loves to stop for 30 minutes to catch up on the day's gossip, while nibbling on something sweet
London Marathon 2015: Paula Radcliffe and the mother of all goodbyes

The mother of all goodbyes

Paula Radcliffe's farewell to the London Marathon will be a family affair
Everton vs Manchester United: Steven Naismith demands 'better' if Toffees are to upset the odds against United

Steven Naismith: 'We know we must do better'

The Everton forward explains the reasons behind club's decline this season
Arsenal vs Chelsea: Praise to Arsene Wenger for having the courage of his convictions

Michael Calvin's Last Word

Praise to Wenger for having the courage of his convictions