UK market reaches levels last seen in 2008

Last week saw the FTSE 100 close at 6,121.8, reaching levels last seen in May 2008. The rise of 3.8% in the first full trading week marks the best start to the year since 1999, as optimism increases over a US budget deal, easing Eurozone tensions and signs of improvement in US and Chinese economies. Wells Fargo, the US bank, also kicked off the earnings season for the US by beating forecasts.

Elsewhere around the globe, the S&P 500 in the US closed at a five-year high of 1,472, while Japanese equities stand at two-year highs after a weakening of the yen benefited the export-reliant nation. Given the positive economic sentiment of the last week, it was perhaps a surprise to see commodities slipping as copper fell 1.2% and crude oil slumped 1.6%. As ever, making sense of short-term movements is an extremely difficult task.

Also in this week's bulletin...
  • Data released last week showed that inflows into equity funds have reached a five year high, as investors react to the brightening outlook for global markets. According to EPFR, the fund research company, net investment into equity funds in the first week of 2013 reached $22.2 billion worldwide - the highest level since September 2007 and the second highest since records began in 1996.
  • Inflation remains a threat and figures to be released this week are set to show that the headline rate of inflation, as measured by the Consumer Price Index, has climbed to 2.8% as a result of upwards pressure on energy and food costs, as well as hikes in the cost of public transport.
  • Millions of high-earners will learn today whether they will receive a less generous state pension in retirement, after plans for a flat rate are likely to be unveiled, expected to be around £145 per week, rising to £160 up to 2017.

View this week's Market Bulletin (PDF), which contains thoughts and opinions of St. James's Place and our range of investment managers on the key issues affecting investors.

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