Germany’s biggest bank has hailed the UK stock market’s ‘remarkable’ performance and backed the ‘best of British’ shares to pull further ahead of European rivals in the months ahead.
Experts at Deutsche Bank said London’s FTSE 100 outpaced the eurozone’s leading index by 10 per cent since the start of April.
The report came as a chorus of experts also signalled a brighter outlook for UK equities.
The shift in sentiment follows a grim period for London as bombed-out valuations left companies vulnerable to foreign takeovers and prompted others to jump ship to list overseas.
Vote of confidence: Experts at Deutsche Bank said London’s FTSE 100 outpaced the eurozone’s leading index by 10% since the start of April
Now, however, Britain is looking increasingly attractive partly thanks to political stability in the wake of the election at a time when Germany, France and the US are gripped by turmoil.
Official figures yesterday added to the cheer as they revealed the economy grew by 0.6 per cent in the second quarter.
Experts at Deutsche Bank are now tipping the FTSE 100 to outpace European rivals in the second and third quarters of this year.
‘The outperformance of UK equities has been remarkable,’ they said, with the FTSE 100 performing 10 per cent better than the Stoxx 50 index of top eurozone shares since the spring.
The report pointed to the impact on UK valuations caused by post-Brexit political and economic concerns. That has created a discount on those values, which is now fading.
‘After the recent elections, the UK is now among the countries with lower political uncertainty in Europe while having a similar growth outlook,’ Deutsche said.
‘The FTSE 100 is not only cheap relative to the rest of Europe but also relative to its own history.’ UK equities are expected to be ‘among the winners’ as investors reassess the outlook for economic sectors and regions, the bank added.
Hugh Gimber, global market strategist at JP Morgan Global Asset Management, said the FTSE 100 ‘starts to work in many scenarios… it’s not just a valuation story’.
In recent months equity investors have been heavily focused on America’s booming tech stocks. But fears about surging debt levels in the US ahead of the presidential election could make UK stocks look a good bet, Gimber suggested.
He told Bloomberg News: ‘The UK economy is in decent shape. We’ve seen that this morning with GDP and labour market data this week.’
Gimber pointed to the Footsie’s mix of ‘defensive’ stocks, including energy and health care, that are ‘not obvious in other parts of the world’.
It comes after Britain’s latest growth figures, which suggest the economy has grown at the fastest pace in the G7 group of advanced nations this year, added to data from the Office for National Statistics this week which revealed that inflation remains close to its 2 per cent target.
The data potentially paves the way for another Bank of England interest rate cut – while unemployment has fallen to 4.2 per cent.
It has undermined claims by the Labour Government that the party has inherited the worst economic circumstances since the Second World War.
This week, a survey by the Wall Street giant Bank of America found that the London stock market is now the top choice among European investors as sentiment towards the eurozone is collapsing.
And Amanda Blanc, the boss of insurer Aviva, said on Wednesday: ‘There are many reasons to be positive about the UK, including greater economic stability and political certainty.
‘We have been all over the world speaking to investors.
‘They are way more interested in the UK now than they were two years ago.’
DIY INVESTING PLATFORMS
AJ Bell
AJ Bell
Easy investing and ready-made portfolios
Hargreaves Lansdown
Hargreaves Lansdown
Free fund dealing and investment ideas
interactive investor
interactive investor
Flat-fee investing from £4.99 per month
Saxo
Saxo
Get £200 back in trading fees
Trading 212
Trading 212
Free dealing and no account fee
Affiliate links: If you take out a product This is Money may earn a commission. These deals are chosen by our editorial team, as we think they are worth highlighting. This does not affect our editorial independence.
