BOOM TIME FOR BRITAIN AT LAST
Share price surge sparks hope recession is coming to an end
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.