Investors on the London stock market are set to catch their breath after the market gained more than nine percent in 2010 and with 2011 shaping up to be a difficult year. The FTSE 100 index dropped 1.81 percent over the week to end the week at 5,899.94 points. Nevertheless it still managed a gain of 9.2 percent over the year.
December was a heady month, with the Footsie breaking through the 6,000 level for the first time in 30 months, rising to as high as 6,021.46 points on Wednesday.
The London market could get a boost in 2011 from renewed appetite for equities on the part of investors and their growing mistrust of the sovereign bond market, said analysts. Strong commodities prices could also support many shares in 2011.
Howard Wheeldon, senior strategist at BGC Partners, said he expects the FTSE 100 to continue rising in 2011 and stand at 6,300 points in 12 months' time.
However, caution is called for as clouds gather over the British economy and those of its European partners.
"We enter 2011 still facing up to a great many unresolved economic and political issues. These include the main sovereign debt crisis in Europe and will need to be addressed now rather than pushed into 2012 and beyond," said Wheeldon.
Britain is raising taxes and cutting spending in 2011 as it tries to grapple with its deficit, which is expected to dent growth, and the Bank of England is expected to begin raising interest rates from their historical low of 0.50 percent to squash inflation.