- MSCI All-Country World Index rose 9 percent last month
- Wall Street was a big winner, with the Nasdaq posting double-digit gains
- UK blue-chip and mid-cap indices had a comparatively weak month
The FTSE 100 has started the last month of 2023 stronger by more than 1 per cent, following a wave of global stock market strength in November.
Global financial markets posted substantial gains during November as investors took confidence from a decline in inflation and hopes that interest rates had peaked.
The MSCI All-Country World Index rose 9 percent last month, its best result since the end of 2020, when results from the Pfizer/BioNTech vaccine trial showed the jab was effective in protecting people from the Covid-19 virus. Was highly effective.
Wall Street was the big winner, with the tech-heavy Nasdaq posting double-digit gains and the S&P 500 jumping 8.7 percent amid optimism that the Federal Reserve will implement interest rate cuts sooner than previously expected.
Modest rises: Britain’s FTSE 100 and FTSE 250 indices had a relatively weak month compared to others, although they still gained.
European markets also had a strong November, with the Stoxx 600 rising 6.45 percent, recovering from three consecutive months of losses, according to the London Stock Exchange Group.
Fresh data on Thursday showed euro zone inflation fell to 2.4 percent last month, well below forecasts and investors’ anticipation of a rate cut in the new year.
Britain’s main indices had a comparatively weaker month than others, although they still posted gains.
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 by a late rally on Thursday from financial, aerospace and defense stocks such as Rolls-Royce Holdings, which was one of its best performers during the month.
Energy stocks including oil supermajors BP and Shell got an additional boost after OPEC announced a production cut of one million barrels per day.
London’s mid-cap index enjoyed its strongest month this year, with travel stocks such as low-cost airline easyJet and cruise operator Carnival among the best performers.
Commercial real estate groups like shopping center owners Hammerson and British Land also benefited from lower borrowing costs.
Analysts expect this momentum to continue through the Christmas holidays in anticipation of higher consumer spending, as well as weak stock dealing volumes during this period that typically reduce the risk of a selloff.
Tom Stevenson, investment director for personal investing at Fidelity International, said: ‘Although market superstitions and seasonal sayings are viewed with a hint of skepticism, the “Santa Rally” appears to be the gift that just keeps on giving.’
He added: ‘The yuletide market boom could be due to a number of factors; Low trading volumes around the Christmas holidays could trigger market movements.
‘The tendency for markets to rise more often than fall may contribute to the holiday spirit.’
Analysts believe the market will remain bearish rather than bearish next year, although this will depend on whether interest rates and inflation decline as expected.
In the UK, the Bank of England is expected to start reducing the base rate from the current 5.25 percent level, given that inflation has already more than halved over the past 12 months.
Since stocks and interest rates are inversely related, a decline in the latter will cause stocks to rise as falling borrowing costs encourage businesses to increase investment.