Analysts expect repeat of FTSE 100’s subdued performance in 2016

Analysts expect a repeat of the FTSE 100s subdued performance in 2016.
Analysts expect a repeat of the FTSE 100s subdued performance in 2016.
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THE FTSE 100 Index lost ground in 2015 and brokers do not expect 2016 to be much better, with the market weighed down by low commodity prices and slowing growth in emerging markets.

Alastair George, chief strategist at Edison Investment Research, said 2015 was a difficult year for investors and warned next year may not be much of an improvement.

He added: “We would not be surprised if major equity indices finished 2016 at levels similar to today - which would be a re-run of 2015.”

But analysts at Killik & Co forecast the FTSE will rise to 6750 by the end of 2016, lifted by a moderate pick-up in global growth, especially in Europe and Japan.

Plunging oil prices had a major impact on markets in 2015 and will continue to do so if Brent crude prices continue to languish near 11-year lows.

The cost of crude is currently below 40 US dollars a barrel, compared to the 115 US dollars the commodity commanded in June 2014, leading to thousands of job losses and billions of pounds in spending cuts across the industry.

BP said this year it will cut capital spending to as low as £11.4 billion a year in the next two years, from about £12.8 billion this year. This is down from an earlier estimate of up to £17.5 billion a year ago. BP and Shell have pledged to retain their healthy dividends, which are a staple flow of funds for UK investors. However, returns at firms with fewer cash reserves such as Tullow Oil, or Premier Oil in the FTSE 250, remain in doubt next year.

Oil prices have fallen as the OPEC cartel has maintained production levels in a bid to exert pressure on US-based shale oil and gas suppliers.

Meanwhile, China’s downturn has led to led to cutbacks and fundraisings across the mining sector.