LONDON (Reuters) - Britain's FTSE 100 share index .FTSE will hold onto slim gains this year though it remains hostage to swings in sterling as the country embarks on complex negotiations on the terms of its exit from the European Union, a Reuters poll showed.
Since last June’s shock vote in which Britons voted to leave the EU, the FTSE has weathered growing political uncertainty in the Britain on the back of a weak sterling which helps profits of international blue-chips that dominate the index.
The index hit an intra-day record high of 7,598 earlier this month before a cloudy policy outlook after an inconclusive general election along with a slide in oil prices and a firmer pound dented the appetite for British shares among foreign investors.
“No-one knows where the Brexit talks and events in Westminster will lead in the short term, which may not help sentiment, while more fundamentally the mix of FTSE 100 earnings growth still does not really appeal,” said Russ Mould, an investment director at AJ Bell.
“Oil and metals prices are hardly buoyant and the banks and insurers are hardly any easier to forecast, especially as the UK economy is not doing a particularly great job of accelerating beyond stall speed,” Mould added.
Reflecting the uncertainty, the range of year-end forecasts in the poll of 24 market watchers was wider than in a March poll - which had predicted the index would be at 7,425 now - and ranged from 6,500 to 8,050. The median was for 7,550, a 2 percent rise from here.
On Wednesday, the index closed at 7,387.80 and is expected to set new records next year, reaching 7,650 by end-June 2018 and 7,950 by the time 2018 is over.
The FTSE, while expected to steadily rise, is set to underperform most peers in the euro zone where the mood is upbeat and political risks are seen to have largely evaporated following Emmanuel Macron’s convincing victory in the French presidential and parliamentary elections. [EPOLL/FRDE]
In Britain, however, after over two weeks of talks and turmoil sparked by Prime Minister Theresa May’s failure to win a majority in a June 8 snap election, a deal was struck this week with Northern Ireland’s largest Protestant party to prop up a minority Tory government.
While the UK economy has proved more resilient than expected since last June’s Brexit referendum, signs of a slowdown, particularly on consumer spending, are starting to appear.
Overall, the Reuters poll of analysts and investors conducted over the past week suggests the FTSE 100 would end the year with gains of just under 6 percent.
(For other stories from the Reuters global stock markets poll:)
Polling by Kit Rees and Helen Reid in London; additional polling by Indradip Ghosh, Sujith Pai and Vivek Mishra in Bengaluru; Editing by Toby Chopra