FTSE 100 holds on to weekly gains as the UK economy returns to pre-pandemic levels

The FTSE 100 was flat on Friday as the market digested a week of corporate updates and news the UK economy had reached pre-pandemic levels.

UK GDP rose 0.9% in November meaning the economy had completed its recovery to levels of activity saw before the pandemic. However, it must be noted these figures were taken before the impact of Omicron fully took hold in December, which is likely to see a reduction in activity.

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“It’s taken 20 volatile months for the UK economy to finally clamber back up to where it had been before Covid wrought its damage.  The speed of growth has caught many by surprise considering the lacklustre figures delivered the previous month, although October’s number have been revised upwards to 0.2%,’ said Danni Hewson, AJ Bell financial analyst.

Although London’s leading index is comprised of companies that largely earn revenue’s from overseas, we may learn in the coming weeks the strength in the UK economy is being replicated in other major global economies.

After a strong start to 2022, analysts remain positive on FTSE 100 shares, suggesting we could see the rally extend further as we progress through the year.

“As we enter 2022, 57% of all analysts’ recommendations are buys and just 9% are sells for constituents of the FTSE 100, the highest and lowest scores over the past eight years. For the FTSE 350 index 59% of all recommendations are positive ratings and just 8% negative ones, so even after last year’s healthy share price gains the analysts are more bullish than ever,” says AJ Bell Investment Director Russ Mould. 

“Momentum players may feel inclined to go with the positive flow. Contrarians may take the opposite view as they bear in mind legendary investor Sir John Templeton’s maxim that ‘bull markets are founded on pessimism, grow on scepticism, mature on optimism and die on euphoria.’

The FTSE 100 was trading at 7,560 in early trade on Friday. At this level the FTSE 100 index has added roughly 1% to its value on the week.

BP and Standard Chartered were the strongest weekly gainer, both adding close to 7.5%.

Helped by stronger oil prices, BP has been a significant contributor to the FTSE 100’s gains due to its large weighting in the index.

Banking shares HSBC, Barclays and Lloyds also posted respectable increases during a week anticipation grew around further increases to global interest rates.

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