Stocks just scored their best month in 3 years – will December deliver too?
- The MSCI All-Country World index rose 9 percent last month
- Wall Street was a big winner, with the Nasdaq posting double-digit gains
- The UK blue chip and midcap indices had a relatively weak month
The FTSE 100 has started the final month of 2023 strongly, adding more than 1 percent after a wave of strength in the global stock market in November.
Global financial markets posted significant gains in November as investors took confidence from falling inflation and hoped interest rates had peaked.
The MSCI All-Country World index rose 9 percent last month, its best performance since late 2020, as results from a Pfizer/BioNTech vaccine trial showed the jab was highly effective in protecting people from Covid-19 virus.
Wall Street was the big winner, with the tech-heavy Nasdaq posting double-digit gains and the S&P 500 rising 8.7 percent amid optimism that the Federal Reserve would implement rate cuts sooner than previously expected.
Modest growth: The UK FTSE 100 and FTSE 250 indices had a relatively weak month compared to others, although they still delivered growth
European markets also had a robust November, with the Stoxx 600 recovering from three straight months of losses to grow 6.45 percent, the London Stock Exchange Group said.
New data on Thursday showed euro zone inflation fell to 2.4 percent last month, much lower than forecast, reviving investor predictions of interest rate cuts in the new year.
Britain's most prominent indices had a relatively weak month compared to others, although they still showed growth.
The blue-chip FTSE 100 ended November at 7,453.75, just 1.8 percent higher than the end of October, while the FTSE 250 rose 6.7 percent to 18,233.5.
The former index was supported Thursday by a late rally in financial, aerospace and defense stocks such as Rolls Royce Holdingswhich was one of the best performers of the month.
Energy stocks, including oil supermajors BP And Shellprovided an additional boost after OPEC announced a production cut of one million barrels per day.
London's mid-cap index had its strongest month this year, with travel stocks such as low-cost airlines EasyJet and cruise operator Carnival among the best artists.
Commercial real estate groups, such as shopping center owners Hammerson And British countryalso saw huge gains as financing costs declined.
Analysts expect this momentum to continue through the Christmas holidays, anticipating strong consumer spending and weaker stock trading volumes during the period, which generally reduces the risk of a sell-off.
Tom Stevenson, investment director for personal investing at Fidelity International, said: 'While market superstitions and seasonal advice are rightly viewed with a touch of skepticism, the 'Santa Rally' seems to be the gift that keeps on giving.”
He added: 'The surge in the Christmas market could be due to several factors; Small trading volumes around the Christmas holidays can amplify market movements.
“The tendency for markets to rise more often than they fall could be adding to the celebration.”
Analysts are increasingly betting that markets will have a soft landing rather than a recession next year, although this will depend on whether interest rates and inflation come down as hoped.
In Britain, the Bank of England is expected to start cutting key interest rates from the current level of 5.25 percent as inflation has already more than halved in the past 12 months.
Because stocks and interest rates typically have an inverse relationship, a fall in the latter interest rate is likely to boost the former as falling borrowing costs encourage companies to increase investment.