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FTSE creeps towards 6,000 in tepid Santa rally

A weak Santa rally has helped the FTSE 100 move towards the 6,000 mark as fund managers look forward to 2013.  

 
FTSE creeps towards 6,000 in tepid Santa rally

The FTSE 100 inched closer towards 6,000 in a tepid festive rally.  

As the closing bell sounded at 12.30pm to mark the festive period with the FTSE sitting on 5,954 a gain of 14 points on the day. Continued uncertainty over how the US intends to implement $600 billion of spending cuts to stop its economy going over a cliff held the FTSE back.

The stocks on Christmas shopping lists include Burberry, which jumped 1.8% in anticipation of a bumper season for the fashion retailer.

Miners were also in demand with Vedanta Resources, up 1.4%, Kazakhmys, up 0.73%, and Xstrata gaining 0.76%.

Elsewhere Aberdeen Asset Management also had a decent morning, gaining 0.8%.

While the UK remains on a slow and bumpy road to recovery, Fidelity's UK equity team believes the picture is overall positive with 'an abundance of undervalued companies with good growth potential simply being ignored'.

Alex Wright, manager of the Fidelity UK Smaller Companies and Fidelity Special Values funds, said: 'With the market as a whole trading on a significant discount to long term averages, particularly in the small and mega cap sectors, I find myself generally positive about the prospects for equities in 2013.'

Wright believes that European Central Bank governor Mario Draghi's open-ended commitment to buy European government debt has 'significantly' reduced risk in the European financial system for the time being.

He does accept that it is unlikely to be 'plain sailing' from here, with a number of potentially serious economic obstacles on the radar, including most notably the stalemate in the US with regards to fiscal policy, geopolitical instability in the Middle East and social unrest in Europe.

However, for Wright this uncertainty creates a number of opportunities.

'The good news here is that I have been able to find plenty of undervalued companies in different parts of the market. Some of these are distressed situations, but some of them are good quality businesses that the market has just ignored,' Wright said.

“Additionally, I think the conditions are perfect for M&A activity, with record low interest rates, strong corporate balance sheets in large caps, bargain valuations in small caps, and the economic environment rewarding those organisations that can operate at maximum scale and efficiency.'

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