Footsie index bursts through 5,000 barrier

The FTSE 100 closed above the 5,000 mark for the first time in almost a year yesterday

FIRST POSTED SEPTEMBER 10, 2009

On Wednesday the closely-watched FTSE 100 index of leading UK companies finished the day over 5,000 for the first time since October last year.

It closed at 5,004.30, more than 40 per cent higher than its low in March when markets where reeling in the face of one of the worst downturns in the last two centuries.

The startling recovery leaves the Footsie just 200 points lower than its level before the collapse of Lehman Brothers, the catalyst for the banking crisis in the US and UK. The rise came as a number of pieces of economic data and corporate takeovers cheered investors.

The National Institute for Economic and Social Research said that Britain's recession ended in May, and Nationwide released a survey showing consumer confidence was at its highest level for a year.

The startling recovery leaves the Footsie just 200 points lower than its level before the collapse of Lehman Brothers

Also giving investors confidence was ratings agency Moody's, which gave an indication that the UK would after all retain its AAA credit rating. There had been worries that Britain's rapidly-increasing debt position would reduce its sovereign status.

Meanwhile corporate activity has returned to the markets with US food group Kraft's proposal of a £10bn takeover of Cadbury and a tie-up between T-Mobile UK and Orange being tabled this week.

The Bank of England will release its latest statement today. Rates are expected to be kept at their current lows, but the position on quantitative easing will be watched closely.

WHAT THEY ARE SAYING
Mike Lenhoff, strategist at Brewin Dolphin, the Guardian: "We could be talking about a move well into the 5000 to 5500 area within a few months. It is here that I can imagine seeing a decent bout of profit-taking. For now though, good news is driving equity markets. Fundamentals are improving and valuations are not unattractive."

Simon Denham, managing director of Capital Spreads, Daily Telegraph: "Difficult as it is to buy up here, the bulls will be taking confidence from the lack (just yet) of a reaction pull back. The big hope is that all this spending does not just build a short term bubble."