Footsie 'to smash 5500 barrier' as London bounces back from disaster
City analysts predicted today that the FT-100 Index would smash through the 5500 barrier as investors put the collapse of Lehman Brothers a year ago behind them.
The index of leading shares this week flew through the 5000 level on signs that the UK is pulling out of recession and the global economy is on the road to recovery.
Today, banking giant Credit Suisse predicted the Footsie would jump as high as 5600 by the middle of next year.
Mike Lenhoff, respected market strategist at City stockbroker Brewin Dolphin, takes a similar line. He is sticking with his year-end target of 5000 but says it could hit 5500.
"Equity markets want to run and, in the case of the FTSE 100, we could be talking about a move well into the 5000 to 5500 area within a few months," said Mr Lenhoff.
Until this week, the last time the FTSE-100 index saw 5000 was a year ago, days after Lehman Brothers collapsed on 15 September, tipping the global economy into recession.
It dropped as low as 3512 in March but has been on the rise ever since, driven by a steady drip-feed of good news.
There are signs the economy returned to growth in the current third quarter of the year (July, August and September) having suffered five quarters of decline since April 2008.
The worst of the housing slump appears to have passed, sales on the high street are surprisingly robust, and although jobs are still being cut, some firms in London and even in the City are beginning to hire new staff.
Jonathan Loynes, chief European economist at Capital Economics, reckons gross domestic product in the UK will rise by one per cent next year, up from his previous forecast of 0.5 per cent.
"The recent improvement in the tone of the domestic economic data and some upward revisions to our global economic forecasts have led us to nudge our forecasts for UK GDP growth in 2010 a bit higher," he said.
London's business community was braced for catastrophe amid fears of thousands of redundancies as Lehman went bust and Merrill Lynch was rescued by rival Bank Of America.
The London housing market was thrown into paralysis by the events of last September.
Prices of luxury homes fell 15 per cent in the five months following the Lehman's collapse but have since gained 4.7 per cent, including a 1 per cent leap during August. That marked the fastest pace of price rises since 2007.
Peter Rollings, managing director of Marsh & Parsons estate agency, said: "Lehman Brothers was like a nuclear bomb going off.
"For three months it was disastrous. Terrifying. No buyers, no sellers. I was practically suicidal at the time. I thought, 'That's it. We're screwed'.
"But after Christmas it started to pick up and now we're getting busy again. In August we had 960 new applicants - double last August's numbers. We're really in recovery mode now."
Having axed nearly 70 staff after the Lehman collapsed, he is now hiring again.
James Hyman, head of residential sales at Cluttons estate agency said: "September 15 was the nail in the coffin of London's property market.
For anybody not sure whether to buy a property after the collapse of Northern Rock and the weakening economy, Lehman Brothers finally made up their mind.
"But now the market has done an incredible U-turn. Since January, you are seeing a 15 per cent to 20 per cent uplift.
Prices have probably now plateaued for the next six months but we will see lots more properties coming on to the central London market."
The leisure industry has also seen a recovery. Clive Watson, chief executive of the Capital Pub Co, London's biggest independent pub operator, said: "I'll never forget 15 September. I thought it was going to be financial meltdown.
"But fortunately we never had that disaster scenario. Our customers still came in and we're trading well."
Andy Cosslett, chief executive of the InterContinental hotel group, said: "Lehman's day signalled the start of the worst trading period the hotel industry has ever seen. The impact was almost instantaneous.
"However, the good news is our hotels in London have been more resilient than in other parts of the world."
But some City experts warn this may still turn be a short-lived jump in what remains a fundamentally weak stock market.
