A revival and record in sight for British indices?

After a technical slowdown in the second half of 2023, the British economy started 2024 with activity indicators: lThe PMI composite index which summarizes both manufacturing and services activities was at 52.9 for the month of March, still well above the 50.0 zone, thus reflecting an expansion of economic activity.

The latest inflation releases showed that core inflation (excluding food and energy) continued to ease to 4.5% in February (compared to 5.1% in January) and headline inflation returned to 3.4% in February after peaking at over 11% in October. 2022. According to the Bank of England (the key rate is still at 5.25%, i.e. at 2008 levels), underlying inflation is still not high enough to warrant another rate cut, with a nice lens gap of 2%.

But the financial institution declared yesterday that “things are moving in the right direction”.

In addition to local macroeconomic considerations, it is also worth remembering that the FTSE100 index is relatively well diversified from a sectoral point of view and, like most European stock market indices, it has global activity through export activity or the presence of companies that make up the international index.

The FTSE100 is not a very expensive index: it has a price/earnings ratio of 12.9 and a “forward” ratio, meaning a say on expected earnings of 11.5. In comparison, the CAC40 has a real price/earnings ratio of 16.2 and the same ratio for the DAX is 15.3. The dividend yield paid by the index is 3.8%, which is quite decent.

Finally, from a technical point of view, and unlike most American indices and unlike the CAC40 and DAX, the FTSE100 is still operating below its historical peak (8047 points reached in February 2023). It is currently trading at 7934 points, the highest level since April 2023. It may be days or weeks before the index sets a new all-time high: it has been operating within a bullish wedge since 2022 and the top of this wedge is currently in the zone of 8400/8500 points or 7% higher than the current one. level

It’s entirely possible that consolidation will continue below the historical resistance zone for a while, but new records don’t seem far off.