Market watchers upbeat about London shares despite another fall
Friday 19 May 2006
London shares had a topsy-turvy day yesterday with traders still unnerved by recent share-price falls. An early-morning sell-off saw the FTSE 100 fall 56 points, wiping out all gains made this year, but it recovered to close just 3.9 lower at 5,671.6. It was just above the lowest close for the year - 5,633.8 on 24 January.
However, many equity strategists remain upbeat on prospects for the year and urged investors not to panic.
Peter Oppenheimer, the head of European portfolio strategy at the investment bank Goldman Sachs, is still broadly positive on UK equities and said most of the underlying factors behind the rising equity markets remain strong. "There has certainly been a shift in inflation expectations and the last few sessions have shown a rapid reduction in appetite for risk," he said. "Even so, we see no problem with valuations of the UK stock market and we remain overweight in equities globally."
Even taking into account the bull run over the past three years, which has seen the FTSE 100 more than double in value, most industry experts believe London shares are not expensive. During the dot.com boom, when the index peaked at 6,930.2, the market traded on a forward price-to-earnings ratio of nearly 22 times. According to Goldman Sachs estimates, the London market trades on about 12.5 times expected earnings.
Market makers saw a dramatic increase in selling on Wednesday afternoon as fears over US inflation led to the London market falling more than 170 points. The early indications yesterday were for more selling, particularly in the commodities sector which has been the main beneficiary of the three-year bull run the London market has enjoyed.
Errol Francis, the manager of the Credit Suisse Income Fund, agreed that UK equities offer reasonable value, particularly in the large-cap stocks. "The market was due a correction after a very strong run, but markets are likely to remain volatile throughout the summer until there is more clarity on the direction of US interest rates and inflation," he said.
- 1 iOS 8 apps and features: eight iPhone settings you need to look at after you install the update
- 2 Kim Kardashian 'nude photos' leaked on 4chan weeks after Jennifer Lawrence scandal
- 3 'F*ck it, I quit': TV reporter Charlo Greene quits live on air in spectacular fashion
- 4 Scotland could still declare independence – even without referendum, says Alex Salmond
- 5 Hitler’s former food taster reveals the horrors of the Wolf’s Lair
Rihanna 'nude photos' claims emerge on 4Chan as hacking scandal continues
Kim Kardashian 'nude photos' leaked on 4chan weeks after Jennifer Lawrence scandal
Khorasan: Muhsin al-Fadhli - the man leading a terror group more feared by US officials than Isis
'F*ck it, I quit': TV reporter Charlo Greene quits live on air in spectacular fashion
Alicia Keys leaks nude photo 'to create a kinder and more peaceful world'
Scotland could still declare independence – even without referendum, says Alex Salmond
Scottish referendum results: Cross-party consensus collapses amid Tory-Labour spat on the 'English question'
Hilary Mantel 'should be investigated by police' over Margaret Thatcher assassination story, says Lord Bell
Scottish independence: David Cameron is becoming the 'George Bush of Britain'
Plebgate MP Andrew Mitchell called officer a 'little s**t', claim court documents 'exposing ex-Chief Whip's 'record of abusing police'
Archbishop of Canterbury admits doubts about existence of God
iJobs Money & Business
£20000 - £25000 per annum + OTE £40,000: SThree: SThree are a global FTSE 250 ...
£20000 - £25000 per annum + OTE £40000: SThree: As a Recruitment Consultant, y...
£20000 - £25000 per annum + OTE £40,000: SThree: SThree Group have been well e...
Up to £80000: Saxton Leigh: My client, a large commodities broker, is looking ...