London's blue-chip stocks are set to gain modestly this year although the outlook is coloured by the British government's determination to stick to the end-December deadline for a trade deal with the European Union, a Reuters poll found.
Prime Minister Boris Johnson's insistence that he will not extend the post-Brexit transition period leaves little room to avoid a potentially damaging "no-deal" outcome if negotiations with Brussels founder. A survey of more than 20 fund managers, strategists and brokers, taken over the past two weeks, found the FTSE 100 index was expected to rise about 7% to 7,510 by end-2020 from Tuesday's close.
Most of the responses came in before the steep sell-off in global stocks in the first two days of this week as investors began to seriously fret about the coronavirus epidemic's potential damage to the global economy.
After a strong post-election run late last year, the FTSE 100 lost momentum after Johnson set Dec. 31 as a firm deadline to sign a trade deal. The emergence of coronavirus, which has killed thousands of people in China and spread to other countries such as Italy and Japan, has meanwhile led economists to start cutting forecasts for growth in economies across Asia.
That has hurt shares of companies with high international exposure, especially in the mining, luxury, and travel and leisure sectors. No respite is expected in the near-term as the FTSE's export-heavy construction means any hit to the world's second-largest consumer, China, will bite into sales and profits. Investors and analysts nevertheless expect the index to remain at around 7,500 points this year, a level hit after Johnson's landslide victory in December's general election.
Stocks in continental Europe are expected to rise modestly as a domestic economic recovery there remains elusive and supply-chains take a hit from coronavirus-struck China.
The poll showed the FTSE 100 was likely to rise to 7,700 points by mid-2021 - a 9.7% jump from current levels - as a clearer picture emerges of future relations with the EU, which Britain formally left on January 31. "I predict the wider uptrend of the FTSE 100 will continue, and as we approach the end of 2020 we should have a better understanding of the post 'transition period' relationship with the EU, and that should help the British market," said David Madden, an analyst at CMC Markets UK.
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