The FTSE 100 was heading into the second half of 2023 on the front foot with a rally driven by housebuilders, UK banks and financials.
The FTSE 100 was trading 0.7% higher on the day at the time of writing and is up 1% so far in 2023. This compares to a 14.5% gain in the S&P 500 and a 15% rise in the German DAX.
“As we conclude the first half of 2023, investors are taking stock of markets and what might happen next. Essentially last year’s losers have become this year’s winners, with the US market bouncing back fast. The S&P 500 is on track to record a 15% first-half improvement thanks to a handful of tech stocks which account for most of the gains,” said Russ Mould, investment director at AJ Bell.
“In contrast, the UK has not been able to keep its crown following last year’s decent showing. In the first six months of 2023, it’s done zilch for investors’ portfolios excluding dividends.
“One might think this is a confusing turn of events. After all, recession fears have been focussed on the US while the UK has proved to be more robust than previously thought. Yet if you exclude the handful of mega cap winners in the US, performance hasn’t been as good.”
UK housing data
On Friday, much better-than-expected UK house price data sparked a wave of optimism in UK assets, with UK banks and housebuilders among the top risers.
According to data released by Nationwide, UK house prices rose 0.1% in the month to June, smashing economist estimates of a 0.3% decline.
Persimmon shares were 1.8% higher, and Berkeley Group Holdings rose 1.6%. NatWest was up 2.5%.
Despite the better-than-expected house price data for June, some analysts warned the outlook for the UK housing market was not as rosy as last month’s data suggests.
“A toxic cocktail of ruinous property prices and devastating mortgage rates could kill off any lingering optimism over house prices. The market held it together in June, but this was before mortgage rate hikes took their toll,” said Sarah Coles, head of personal finance at Hargreaves Lansdown.
“At the end of May, the average 2-year fix was 5.38% and the average five-year deal was 5.05%, according to Moneyfacts. In June, house-hunters with this kind of mortgage in their back pocket were treated to a bumper array of homes for sale and sellers who were desperate to do a deal. It’s these buyers who were prepared to pay house prices up 0.1% from a month earlier.
“By the end of June, things look very different. With the average two-year fix at 6.37% and the average five-year deal at 5.94%, it puts an enormous dent in affordability, and may well drive a huge number of buyers out of the market.”
Ocado
Ocado was again the FTSE 100’s top riser amidst ongoing takeover speculation and stakebuilding by a major fund.
At the time of writing, 86 of the FTSE 100’s constituents were trading in positive territory.