The deep freeze on UK assets is melting – #deep #freeze #assets #melting
LONDON, Feb 13 (Reuters) – U.K. stocks and bonds are drawing strong buying interest, not a complete vote of confidence in the economy but a reassuring sign for policymakers that Britain The deep freeze on investment caused by last year’s market turmoil has melted away.
London’s blue-chip FTSE 100 stock index (.FTSE) is hitting record highs, with the internationally-focused bourse benefiting from global trends such as the reopening of the Chinese economy from strict COVID lockdowns.
Ten-year government bond yields have fallen 27 basis points to 3.4% so far in 2023, marking one of the biggest declines in government funding rates among the Group of Seven’s most advanced economies.
This is the past Prime Minister It marks a turnaround from the turmoil caused by the Liz Truss administration’s ill-received mini-budget in September, which briefly lifted UK five-year bond yields above those of Italy and Greece as investors fled.
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About 910 billion “This marks a possible turning point for UK assets,” said Nick Kissack, UK portfolio manager at Schroders, which manages a dollar client fund.
“We saw a level of extreme risk aversion” in September, he said, “and the risk premium for UK assets has come down since then.”
Reuters GraphicsFTSE FOUND FREE
FTSE-100, date tax fell 18% from near 18-month lows hit in October after a mini-budget that revealed cuts and subsequent big increases in repaid borrowing.
Sterling is up about 13% from September’s record lows, while the domestically-focused FTSE 250 share index (.FTMC) has risen about 20% is high.
The FTSE is dominated by firms that earn most of their revenue overseas 100 reached a record high because investors also Barclays Europe they played what Emmanuel Kaun, head of equity strategy, called a “global stagflation theme.”
In short, it’s the prospect of higher global interest rates, weaker growth and higher inflation.
The blue-chip index’s largest weighted components are oil and gas, whose treasuries have swelled as a result of rising energy prices following Russia’s aggression against Ukraine. gas groups, banks benefiting from high interest rates and consumer products expected to perform reliably during this period. decline.
With large mining and materials components, the FTSE also got a boost from the reopening of the Chinese economy, rising in tandem with Hong Kong’s Hang Seng share index (.HSI).
Reuters graphics
However, analysts expect the FTSE 100’s gains to be tempered by a stronger global growth outlook coupled with falling energy inflation.
“Our clients are wondering if they should go back to riskier markets,” Kau said, referring to recent updates on global economic forecasts.
GIRL TRIP
Mini-budget-hit UK government bonds proved one of the best sovereign bond buys of 2023 and USA and outperformed German peers as traders believe a looming UK recession will drag down high inflation.
The Bank of England has softened its earlier forecast of a sharp economic downturn, but still sees a contraction ahead.
The headline forecasts inflation will fall to 3% from the last reading of 10.5% by early 2024 – which would push fixed coupons higher inflation Attracts bond investors worn out with.
Reuters graphics
Markets expect the BoE to raise interest rates at least once more from 4%, Europe The Central Bank is expected to remain hawkish for longer as the forecasts regarding the euro zone improve.
“The UK is an outstanding global economy with no improvement in growth prospects,” said Baylee Wakefield, multi-asset portfolio manager at Aviva Investors, who expects Treasury debt to continue to outperform.
Others were more cautious, eyeing future gold supplies as the government rushes to shore up the slowing economy.
“After the recent rally, gold generally looks a bit expensive,” said Craig Inch, head of rates and cash at Royal London Asset Management.
Reporting by Naomi Rovnick; Graphics by Pasit Kongkunakornkul; Edited by Dhara Ranasinghe and Emelia Sithole-Matarise
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2023-02-13 18:26:53
Source – reuters
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