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FTSE rollercoaster leaves investors out of pocket

Published 26/12/2015

The Footsie is more than 7% down from its opening level of 6566 at the start of 2015
The Footsie is more than 7% down from its opening level of 6566 at the start of 2015

The FTSE 100 Index has been on a rollercoaster ride in 2015 that ultimately left investors unsteady on their feet and out of pocket.

The Footsie is more than 7% down from its opening level of 6566 at the start of 2015, b ut that only tells half the story of a turbulent year on the London Stock Exchange and markets across the world.

It was a year that saw the return of the mega deal, led by Budweiser brewer Anheuser-Busch InBev buying London-listed Peroni and Grolsch group SABMiller for £71 billion in one of the biggest takeovers in corporate history.

Next came Royal Dutch Shell's £47 billion agreed takeover bid for gas explorer BG announced in April.

February 24 saw the London market break a record that had stood for more than 15 years as the FTSE 100 hit a new all-time high, boosted by investor optimism about the financial crisis in Greece.

Britain's benchmark index of leading shares closed at 6958.89, which meant the FTSE 100 finally surpassed its previous intraday peak of 6950.6 set on December 30 1999, just before the dotcom bubble burst.

The index reached a series of all-time highs before hitting its peak of 7104 on April 27, boasting a total market value of £2 trillion.

But all this was to change in the summer as China's economic woes began to unfold.

Global markets were spooked as China posted slowing gross domestic product figures of around 7% after almost a decade of double-digit growth.

Beijing responded with a series currency devalutions of its yuan to stimulate its economy.

In London, the stock market saw a number of 100-point plus falls, as heavyweight oil and commodity stocks saw their values plunge.

The contagion infected Western markets too. Germany's DAX index fell to more than 20% below its peak, while US stocks see-sawed.

Adding to world market jitters throughout the year was the recovering US economy, leading to guidance from US Federal Reserve chairwoman Janet Yellen that the first US interest rate hike from near-zero levels since June 2006 was on the cards.

In normal times this removal of a stimulus measure would be seen as bad for traders, as cheap cash favours investors.

But after a fragile recovery since the financial crisis, this move was seen as a sign that growth was beginning to take hold.

However, uncertainty over when the Fed would pull the trigger on a US hike caused global markets to rise and fall throughout the year.

The Footsie fell to a three-year low of 5874.1 in early December amid intense speculation over a US rates hike and as o il prices plunged.

This was the lowest level since December 2012 and gave the market a value of £1.6 trillion.

After such an unsteady year, the market ended with an uptick when the US Fed finally called time on near-zero borrowing costs, raising its key interest rate by 0.25% on December 16 and ending a year of uncertainty over monetary policy.

Overall, m arkets finished the year lower, with some sectors hit much harder than others.

The slowdown in China has impacted miners in particular, with four of the biggest falling stocks coming from this sector, led by Anglo American which wrote down 3.5 billion US dollars (£2.4 billion) on the value of its iron ore and other commodities at its half-year results in July.

Broker Hargreaves Landsdown said: "Much will depend on when commodity prices recover, but so far there is little sign of this happening.

"Chinese demand looks set to remain weak for a while and new capacity commissioned in the boom years is still coming on stream. This supply-demand imbalance could take years to correct."

Asian-focused bank Standard Chartered also faced a tough year of slowing business with new boss Bill Winters forced to cut staff and launch a £3.3 billion rights issue.

Housebuilders made a good showing on the winners list for 2015, with Taylor Wimpey at the top of the pile.

The sector enjoyed favourable economic conditions, as well a range of Government support measures, such as the continuation of the Help to Buy programme.

Hargreaves Landsdown said: "Record low mortgage rates, a benign land market and favourable Government policy are all playing their part, supporting margins, cash flows and dividends.

"The Bank of England will have to raise interest rates eventually, but any increases are likely to be gradual. This suggests to me the purple patch could last a while longer."

Stock market winners of 2015, tabled as c ompany, sector and percentage change:

Hargreaves Lansdown, Financial Services, plus 44

Taylor Wimpey, Housebuilding, plus 43

Direct Line, Nonlife Insurance, plus 39

Barratt Developments, Housebuilding, plus 30

Sage, Software, plus 27

Stock market losers of 2015:

Anglo American, Mining, minus 75

Glencore, Mining, minus 71

BHP Billiton, Mining, minus 48

Antofagasta, Mining, minus 41

Standard Chartered, Banking, minus 39

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