Share price surge sparks hope re­ces­sion is coming to an end

Daily Express - - FRONT PAGE - By Macer Hall Po­lit­i­cal Ed­i­tor

BRI­TAIN was given a £ 33bil­lion boost yes­ter­day as shares soared to an 18- month high af­ter a crunch po­lit­i­cal deal in Amer­ica.

In a per­fect start to 2013 for savers and in­vestors, the FTSE 100 In­dex smashed through the 6000 bar­rier for the first time since July 2011.

The good news emerged amid confi dence among Bri­tain’s busi­ness lead­ers and a strength­en­ing of man­u­fac­tur­ing in­dus­try which trig­gered hopes that re­cov­ery from re­ces­sion is tak­ing hold at last.

Share prices of Bri­tain’s top 100 firms rose by 129.6 points to 6027.4 yes­ter­day – an in­crease of 1.8 per cent – af­ter US politi­cians agreed a deal to avoid the so- called “fis­cal cliff” of crip­pling tax rises and spend­ing cuts.

Ex­perts said the boom was a New Year tonic for hard­pressed Bri­tons. Pen­sions cam­paigner Dr Ros Alt­mann, di­rec­tor gen­eral of Saga, said: “It’s a great start to 2013 – let’s hope it con­tin­ues.

“It will make a real dif­fer­ence to peo­ple who are about to re­tire. The big­ger your pen­sion fund when you are about to re­tire the big­ger your in­come will be.” She added: “This should give a boost to the Government in terms of gen­eral eco­nomic pol­icy but also in the push to get peo­ple to join pen­sion funds.”

An­a­lysts had feared a dou­ble jolt to the fal­ter­ing US econ­omy could have sent the world into a fresh melt­down.

Chris Beauchamp, a mar­ket an­a­lyst at spread- bet­ting firm IG In­dex, said: “In the end, they did it. For now, mar­kets are re­lieved we moved into 2013 with some sort of deal.”

Across Europe, mar­kets pow­ered ahead. Ger­many’s Dax was up 2% and the Cac 40 in France rose by more than 1.4%. Bri­tish blue- chip firms

were cheered by re­sults of a sur­vey re­veal­ing a re­turn to growth in man­u­fac­tur­ing.

In­creased de­mand from Bri­tish firms off­set an on­go­ing slump in or­ders from the cri­sis- hit eu­ro­zone.

The lat­est Markit/ CIPS pur­chas­ing man­agers’ in­dex showed a head­line read­ing of 51.4 in De­cem­ber, the high­est for 15 months and mark­ing a re­turn to growth for the first time since last March.

Ex­perts said it raised hopes man­u­fac­tur­ing out­put has sta­bilised. Howard Archer, chief Euro­pean and UK econ­o­mist at IHS Global In­sight, said the boost may also help the wider econ­omy avoid an end- of- year con­trac­tion.

“The marked pick- up in De­cem­ber is a sig­nif­i­cant boost to hopes that the econ- omy was at least flat in the fourth quar­ter and could even have grown marginally.”

Lee Ho­p­ley, chief econ­o­mist at man­u­fac­tur­ers’ or­gan­i­sa­tion EEF, said: “The rise in out­put and or­ders at the end of last year is a pos­i­tive sig­nal that the sec­tor can con­tinue to re­cover, but the strength of that re­cov­ery will de­pend on what hap­pens in other parts of the world.”

The US deal, which avoided mid­dle- class tax in­creases and de­layed spend­ing cuts for two months, was a tri­umph for Pres­i­dent Obama af­ter his pledge to im­pose higher taxes on the wealthy.

The Lon­don mar­ket had been in limbo as traders pon­dered the im­pli­ca­tions of Amer­ica fail­ing to avoid the fis­cal cliff. But ex­perts feared the mar­ket ela­tion would be short- lived, with Amer­ica still to agree long- term mea­sures.

Joe Run­dle, head of trad­ing at ETX Cap­i­tal, said: “It’s only a mat­ter of time be­fore mar­ket par­tic­i­pants lose their buzz as US law­mak­ers will have to re­con­vene.”

He pre­dicted the con­tin­ued US po­lit­i­cal wran­gling could prompt “huge bouts of volatil­ity in mar­kets”.

David Jones, chief mar­ket strate­gist at IG In­dex, said the fis­cal cliff cheer was also help­ing mar­kets cap­i­talise on the tra­di­tional “Jan­uary ef­fect” boost. Stock mar­kets usu­ally rise in Jan­uary, as in­vestors who have sold share­hold­ings in De­cem­ber buy back into the mar­ket.

F some­body had a fool­proof way of mak­ing a strong eco­nomic re­cov­ery more likely, most of us would be pre­pared to give it a go. In fact we do col­lec­tively pos­sess the power to give the econ­omy added mo­men­tum and the way to do so is sim­ply to have faith that things are im­prov­ing.

Eco­nom­ics is at least as much about group psychology as it is about dry ac­coun­tancy.

Op­ti­mistic fam­i­lies and busi­nesses are more likely than pes­simistic ones to com­mit funds to in­vest­ing in their fu­ture – gen­er­at­ing a vir­tu­ous cir­cle of fur­ther growth.

It is far too long since there was much op­ti­mism around about our prospects. This is de­spite plenty of ob­jec­tive ev­i­dence sug­gest­ing that Bri­tain has now come through the worst of a very long down­turn and has the po­ten­tial to bounce back quickly dur­ing 2013.

The FTSE 100 in­dex has roared past the 6,000 mark, busi­ness lead­ers are record­ing an up­turn in con­fi­dence, house prices are nudg­ing up­wards and the Bri­tish econ­omy is cre­at­ing new jobs all the time.

No­body is sug­gest­ing that all our prob­lems are over but nei­ther is there any rea­son to sup­pose that we are all doomed.

To all the en­ter­pris­ing, en­er­getic peo­ple out there with dreams to pur­sue, may 2013 be the year you turn them into re­al­ity. Af­ter all, a ris­ing tide can lift all boats.

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