FTSE 100 ends year lagging international peers

• FTSE 100 closes up 0.14% on last day of trading in 2023 at 7733
• The blue-chip index has risen 3.7% since last trading day in 2022.
• Brexit hangover has eased but lack of tech superstars is a drawback for London.
• Inflation appears more stubborn than in the US and Europe.
• Top risers in FTSE 100 include Rolls Royce and Marks and Spencer.
• Top fallers in the top flight include Anglo American and Fresnillo.

Susannah Streeter, head of money and markets, Hargreaves Lansdown:

‘’The FTSE 100 has stumbled over the line, eking out a modest gain for the year but failing to shoot the lights out. Compared to its international peers, 3.7% is a paltry rise since the last trading day in 2022, especially when you look at just how high the S&P 500 has climbed, up 25% over the year, while the DAX in Frankfurt has jumped by around 20%. The FTSE 100 reached the heady heights of 8,047.06 in February but has struggled to regain its form. Britain’s blue-chip index still appears unloved with attention grabbed by the bright lights of Wall Street and the tech heavy makeup of New York’s exchanges, with a frenzy for all things AI fuelling buying behaviour. Even though the Brexit hangover has eased, the UK’s stagnating economy and volatile political scene of recent years appears to be putting off investors.

But the DAX’s rally has come despite unfavourable data showing Germany’s economy is contracting. However, with an energy crisis being avoided, gas and crude prices coming down and inflation falling more sharply than expected, it’s buoyed sentiment for listed industrial companies.

It may be a slower process, but inflation is heading in the right direction in the UK, though is still likely to remain stubborn. A general election is in sight, which may also help spark enthusiasm. The resilience of UK consumers, and the underlying economy, may once again exceed expectations 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. Crude prices are expected to head for higher ground amid Middle East tensions and actions from OPEC+, which could help provide a tailwind for listed energy giants. A big dose of stimulus for China’s faltering economy would help propel miners higher, while longer-term demand for metals and minerals to power the net zero transition should also provide support.

Top risers and fallers in FTSE 100 for 2023

When it comes to individual stock performances, a handful of stocks really have surprised on the upside and have staged a remarkable turnaround over 2023.

Rolls Royce has revved up its engines to make huge strides over the year, clinching the top spot as the biggest gainer in the FTSE 100 in 2023. The new chief executive, Tufan Erginbiliç, was pulling no punches when he slated the company as being ‘a burning platform’ back in January. But over the last 12 months, under his leadership, it’s risen from the flames, with shares up by 203%. A restructuring programme has prompted improvements in productivity, while disposals have lightened the load of recent financial scars. A multi-billion-pound order book gives the group a good deal of visibility over future revenue, but further turbulence can’t be ruled out given the company’s high debt burden.

Marks and Spencer has also made remarkable progress, with clothing ranges falling firmly back in fashion and the food division tickling the fancy of armies of shoppers who appear far more insulated from cost-of-living headwinds. Investors have cheered its results and shares have risen by a stellar 115% over the year. Its bread-and-butter customers are more likely to have paid off their mortgage and so have higher disposable incomes, which is partly why the chain is showing such resilience, which is likely to continue into 2024. The challenge will be to attract younger customers but here the company’s strategy of offering homeware and clothing to suit varied price points and styles should pay off in attracting different generations. Life is slightly less rosy when it comes to the M&S joint venture with Ocado and, although we may not see significant progress in 2024, management’s track record of turnarounds does bode well for the 3–5-year plan to boost its fortunes.

At the other end of the table, the miner, Anglo American, has faced a tough year, closely followed by St James’s Place. The wealth manager saw its share price fall by more than 38% over the year, amid concerns about its business model after it came under regulatory pressure to reduce fees. Anglo American’s nadir came earlier in December after a third downgrade in production expectations in just 20 months, with copper targets particularly disappointing. Its operations in South Africa have also become unstuck due to energy blackouts, as well as distribution problems for stockpiles of iron ore. The slowdown in China has also hit demand for diamonds and platinum. Investors have been very discouraged with shares falling 39% over the year. However, longer-term the company’s diversified approach means it isn’t beholden to the fortunes of a single commodity price, which make it a more attractive proposition.

Fresnillo, the Mexican silver miner, has also had a challenging 2023, with shares down around 34%. The company saw pre-tax profits severely dented in the first half, falling by 69% as cost inflation bit harder. It was also hit by a sharp strengthening in the Mexican peso.  Labour challenges though eased for the firm, and production has been ramped up at key plants. Although silver hasn’t followed gold’s trajectory as a ‘safe haven’ investment in recent months compared to historic norms, there is expected to be considerable industrial demand over the coming years, particularly for use in solar cells and batteries. However, with global demand uncertain heading into 2024, there is likely to be more volatility for Fresnillo to come.”