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Index IDEA: UK market observers analyze FTSE 100 moves in the context of Trump, BOE

The FTSE 100 Index, measuring the 100 most highly capitalized blue chip companies listed on the London Stock Exchange, reached its most recent all-time high of 7,337 on January 13 to cap 14 days of rising values, the longest run of consecutive daily gains in its 33-year history.

Yet the Index has declined since January 13, closing at 7,107 on February 1, and is now down slightly year-to-date measured in Sterling. And it has been further impacted in recent days with growing concerns among UK investors on travel bans introduced by the new Trump administration in the US and their potential impact on global markets. With the UK market digesting remarks by Bank of England Governor Mark Carney at the BOE’s Thursday quarterly Inflation Report press conference, FTSE Russell asked leading UK market observers for their opinion on the potential direction for the UK equity market.

Mark Wall, Chief European Economist, Deutsche Bank, said:

“The UK economy has been holding up remarkably well after the referendum, despite forecasts of weakness. The global economy is shrugging off mounting political risk and shows renewed momentum. The Bank of England is facing a dilemma with above-target inflation. We expect the Bank to hold its nerve and maintain its neutral policy stance fearing a delayed Brexit effect, but the risks are tilted towards a tightening bias emerging.”

Dr. Allan Lane, Managing Partner, Twenty 20 Investments, said:

“The FTSE 100, like it or not, will still be strongly influenced by what happens in the US equity markets. At the first sign that Trump starts delivering on his promise of tax cuts, a move that he might be compelled to in light of his current foreign policy, then we may see a resurgence of the FTSE 100's ascent. If the Dollar surges with that, then the FTSE 100 value may increase further.”

Henry Cobbe, Head of Copia Capital Management, said:

“The FTSE 100 has significant dollar revenue exposure, so the FTSE 100’s highs have been as much about the Sterling weakness as about explicit equity strength. Sterling weakness and the potential for a hard Brexit is also having a knock-on effect on inflation expectations, and hence some upward pressure on interest rates.”



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Views expressed by Mark Wall of Deutsche Bank, Allan Lane of Twenty 20 Investments and Henry Cobbe of Copia Capital Management are as of February 3rd and subject to change. These views do not necessarily reflect the opinion of FTSE Russell or the LSE Group.

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