Analysis: Why the UK stock market was so disappointing in 2023

Analysis: Why the UK stock market was so disappointing in 2023

According to a report from www.faz.net, the year on the British stock market is coming to an end, but overall developments have been disappointing. The FTSE 100 has improved by almost 2 percent since mid-November and was above 7,570 points on Tuesday. Nevertheless, the London Stock Exchange largely stagnated, with an increase of just 1.6 percent. In an international comparison, the FTSE 100 is almost at the bottom, with only the emerging market index MSCI EM performing even worse. Compared to other stock exchanges in Europe and the USA, the development on the London Stock Exchange was disappointing. The Italian stock market has risen almost 30 percent this year, while the FTSE 100 has seen only modest gains. The reasons for this are complex; both the lack of technology stocks and the stagnation in raw materials and energy stocks played a role.

The weak development on the London Stock Exchange has an impact on the market and the financial industry. Investors who invested their money in London stocks were able to make less profits than investors on other stock exchanges. This could weaken confidence in the UK market and lead to investors moving their capital to other markets. The weakness of the British economy is reflected in the results of the FTSE 100 companies, which generate a large part of their sales abroad. However, a slight improvement in the economy in the final quarter indicates a possible stabilization.

A crucial question currently arising in the London financial center is the possible reduction in key interest rates by the central bank. Analysts expect the Bank of England could begin cutting interest rates later in 2024 to respond to lower inflation and stimulate the British economy. UK government bond yields have already fallen since November, suggesting expectations of future interest rate cuts.

As www.faz.net reports, some economists believe that interest rate cuts will come from the second quarter of 2024, but perhaps at a rather slow pace. Inflation in the UK is expected to be more stubborn than in the euro area, which could mean the central bank takes a more cautious approach to cutting interest rates. Nevertheless, a more rapid reduction in key interest rates could be expected from autumn 2024. Investors and companies should take these developments into account in their financial decisions.