FTSE 100 marks 40th birthday with declines

The FTSE 100 turned 40 on Wednesday and marked its birthday with declines driven by weakness in cyclical names after US technology shares performed poorly overnight.

“The FTSE 100 marked its 40th birthday with a celebration more akin to a quiet pint in an empty pub than anything more befitting of a major landmark,” said AJ Bell investment director Russ Mould.

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“The index was flat after mixed trading in the US overnight, where tech stocks came under pressure. The so-called ‘Magnificent Seven’ accounted for a big chunk of the gains achieved by global stocks in 2023 and much will rest on their performance again in 2024.”

The selling of US tech stocks spilt over into London’s cyclical sectors, including miners, housebuilders, and consumer discretionary.

Anglo American was the top faller, shedding over 5%, closely followed by Fresnillo and Glencore.

After upbeat data on consumer spending over the festive period, supermarkets were among the top risers. The sector will report key festive trading updates in the coming weeks. Tesco, Sainsbury’s and Marks and Spencer all rose more than 1%.

Birthday bumps

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Today’s declines in the FTSE 100 served as a reminder of the challenges London’s leading index has faced in recent years.

Indeed, these obstacles and London’s poor performance are laid bare by the surging value of overseas stock markets, including the US. The comparison of performance over 5, 10, and 20 year periods are eye-wateringly bad for the FTSE 100.

“As the FTSE 100 celebrates its 40th birthday, the UK stock market finds itself in a quagmire of existential angst. The headline index has made almost no progress since the start of the century, and in the last decade the Footsie has been totally eclipsed by the US stock market, which is winning company listings and financial flows,” said Laith Khalaf, head of investment analysis at AJ Bell.

“Since 2016, domestic investors have been relentlessly selling UK equity funds in favour of more global offerings, no doubt driven in part by better performance from overseas equities.”

London’s stock market now trades at a historically low valuation, and individual constituents are attracting the interest of overseas acquirers. We recently discussed a selection of potential takeover targets and the value in UK companies compared to international peers.

The coming year will be crucial for the future of UK stock markets. If domestic investors don’t step in and buy UK equities at current lowly valuations, there is the risk takeovers and the decisions by companies to relocate their primary listings will leave London a shell of its former self.

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