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The Trader: Quiet end to a record-breaking week for UK markets

How much further can British indices rally?
The Trader: Quiet end to a record-breaking week for UK markets
  • FTSE 100 looks set to end week up around 3 per cent 
  • Wall Street continues to climb
  • Europe feeling the pinch from another round of lockdowns
  • Chinese manufacturing numbers suggest ongoing demand for goods

European stocks opened a shade lower on Friday morning as the major bourses look to close out a largely positive holiday-shortened trading week. The FTSE 100 is up around 3 per cent this week after hitting its strongest since February 2020. It’s been a very good week for UK equities as the blue chips finally broke out to post-pandemic highs and the mid-caps on the FTSE 250 hit an all-time high. 

Lots of reasons behind the positive moves in UK equities this year: a vaccine rollout of immense success and an expected economic bounce back as activity returns towards normal both here in Britain and globally are supportive. But you could also look to the relative underperformance of UK equities as a factor – from a low bar they are finally catching up, you could say. Whilst the US and European equity benchmarks have roared to all-time highs since the pandemic, the FTSE 100, in particular, has struggled. The recovery in the pound has not helped -weakness this month has helped the FTSE - but it remains the case that the UK’s largest companies are trading at a discount to peers. This has been the case for years, but there is reason to think Britain can close the gap. The FTSE 100 is already up 7 per cent this year to date, against gains of around 9 per cent for the S&P 500 and almost 11 per cent for the DAX.  

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