Global FTSE 100 shrugs off parochial UK GDP data

October 23, 2009

Britain’s FTSE 100 seems to be almost impervious to any bad data that can be thrown at it. GDP data shocked the market showing the UK unexpectedly contracted in the third quarter.

Sterling tumbled more than a cent against the greenbackand gilts jumped while the FTSEurofirst 300 pan-European equity index trimmed gains considerably.

But Britain’s FTSE shrugged it off, hugging its 1 percent gains in the face of data which shows the UK economy is still ailing badly.

 It is the cosmopolitan nature of the FTSE which is keeping it buoyant. Miners and energy firms make up over 32 percent of the index, while miners banks, also very much global institutions make up a further 16 percent.

Howard Wheeldon on BGC Partners says:

“The FTSE is a function of globalalisation and trading conditions and growth elsewhere in the world have more of an impact than domestic growth. If the global recession is over and demand is picking up internationally, it’s all the more reason to close your eyes to
what’s going on in the tiny island that it happens to be registered in.”

2 comments

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“..close your eyes to what’s going on ….”???

On the contrary, the longer the economy remains in recession, the longer that the government will tell the BoE to print money and pour it into the banks, who will in turn use the money to pump up share prices and their own bonuses.

Let the good times roll !!! Anyone with a bit of spare cash should join the feeding frenzy (but don’t forget to set your stop-losses ready for the next crash).

Posted by Jason | Report as abusive

I think there has to be a reality check now otherwise we are in for a very slow 2009. I’m not sure that FTSE investors will hold on for much longer, rather we are in for a selling spree as seen by some of the Middle East profit takers. Bankers have not changed their behaviour and we have tried to regulate the markets too quickly, restricting credit lines to SME’s. The FTSE is clearly not bullet proof and I’m not sure that unrealistic or over optimistic views based on global theory or mathematics help anyone at this time.

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