London-listed equities have got off to a weak start in 2024 compared with international peers as investors snub the FTSE indexes for better returns elsewhere.
The blue-chip FTSE 100 index has fallen 1.93 per cent so far this year, while the mid-cap FTSE 250, which is more aligned with the health of the UK economy, has dropped 2.30 per cent.
Meanwhile, New York’s S&P 500 and Nasdaq 100, the Eurostoxx 50, Tokyo’s Nikkei 225 and Germany’s Dax have all posted gains.
Susannah Streeter, head of money and markets at Hargreaves Lansdown, told City A.M. that a “frenzy for all things AI” was grabbing attention away from London in recent weeks, on top of worries over the country’s stagnating economy.
The Nikkei 225 and Nasdaq 100 have surged since the start of the year, rising more than 10 per cent and eight per cent respectively.
These technology-heavy indexes have been lifted by the likes of chipmaker Arm, investor Softbank, Meta and Nvidia amid a boom in demand for AI and a continued rebound for high-growth tech stocks.
Shares in Cambridge-based Arm, which snubbed London for a New York IPO last year, soared more than 50 per cent on Thursday after it raised its profit and revenue guidance, giving the firm a market capitalisation of some $120bn (£95.2bn).
This valuation would make Arm the fifth-biggest stock on the FTSE 100 if it were listed in London.
Russ Mould, investment director at AJ Bell, said: “There has been nothing profound happening in the first few weeks of 2024 to shift market perception that the US economy is doing well, China’s is doing badly and Europe and the UK are stuck in the mud, somewhere in between.”
He added: “The FTSE 100’s earnings and dividends are generated primarily by banks, oils, miners and consumer staples, and none of those four sectors are really firing investors up with enthusiasm right now.”
The LSE has suffered from poor volumes and liquidity since last year, as well as a dearth of big-ticket listings and a raft of companies opting to IPO overseas.
Its market capitalisation – the value of all companies listed on the LSE – was £3.4tn in November, down nearly £300bn from the same period in 2022.
Meanwhile, the number of companies trading in London has steadily fallen to 1,065 in November from more than 1,168 five years before.
Streeter said progress on inflation, a general election and the resilience of UK consumers could spark renewed enthusiasm for the stock market in 2024.
“Hopes of a soft landing for the US may also help the index, given the multinational makeup of companies which are reliant on strength in the global economy,” she noted.