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Share dealing continues to keep FTSE 100 above 5000

11 September 2009 / by Rebecca Sargent

Share dealing on the London Stock Exchange has continued to keep the FTSE 100 above its groundbreaking 5000 mark.

Earlier this week, the FTSE 100 broke through the 5000 point barrier for the first time since October last year, and experts are predicting bigger and better things as the financials report positive economic data, giving share dealing an extra boost.

In fact, according to Santander Asset Management, there are, "two main reasons for investors to remain hopeful that the rally can continue, at least in the short term."

The first reason is that there is no sign of inflationary pressure picking up, Richard Moore, manager of the Santander UK growth fund said: "It is likely that inflation will only begin to rise once unemployment begins to fall and wage growth starts to pick up, and unemployment is likely to continue to rise for some time yet.

"Economic growth with low inflation has historically been a so called 'sweet spot' for equity markets," he adds.

The second reason according to Mr Moore, is the implication of the Kraft bid for Cadbury, which took the markets by surprise and saw the company's share price increase by 40 per cent. Commenting, he adds:

"Investors were clearly shocked and the bid represents £10billion worth of corporate confidence in the future as well as highlighting just how undervalued some stocks have become, placing a floor under valuations."

A recovery though is down to the consumer, Mr Moore adds: "Despite the optimism of these two points, ultimately everything will depend upon the consumer. Central Banks have provided the liquidity but it is up to the consumer to spend rather than save and there is little sign of this happening yet.

"However, the good news is that stock markets are discounting mechanisms that 'climb the walls of worry' and looking ahead this should continue to be the case," he concluded.

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