Brexit fears keep FTSE 100 behind global peers

London’s FTSE 100 stands apart as the global laggard among major stock indices with investors giving it a wide berth almost a month since the election of Donald Trump.

The performance reflects concern over Brexit negotiations hurting the shares of companies exposed to the UK economy while the pound’s recent rebound against the dollar and the euro offsets the boost for resource stocks from rising crude and base metals prices.

The FTSE 100 is up just 1 per cent since November 7, the day before the US election. In contrast, the S&P 500 has gained almost 6 per cent and set an intraday record peak at the end of last month. London’s index last set a record on October 11.

While it has made a better showing in local currency terms — which takes the FTSE up almost 4 per cent — its underperformance remains notable.

Even Italy’s FTSE MIB, which faced its own political disruption from the referendum on reform of the constitution that the government lost — is up almost 5 per cent in dollar terms.

Sentiment in London has remained cautious as investors track the twists and turns of the government’s intentions for the Brexit process with the Article 50 trigger that starts the two-year divorce process with the EU due to be pulled in March.

Richard Hunter, head of research at investment manager Wilson King, said: “The FTSE 100 has been overtaken internationally by the optimism emanating from the Trump Trade, and held back at home by the inevitable concerns around Article 50 which, de facto, are both stories that will go on into next year.

“Sentiment is bound to remain skittish given such uncertainties.”

A promise from senior cabinet ministers for a smooth and orderly Brexit transition came as the Supreme Court case on the extent of parliamentary scrutiny required for the vote continued on Tuesday, underlying the conflicting signals being received by investors.

The worst performers since the vote reflect both the international and domestic pressures faced by its constituents.

Among the biggest fallers over the period are electricity distributor National Grid, down 11 per cent and precious metals miner Randgold Resources.

The FTSE 100’s fortunes would be markedly worse but for support from financial heavily weighted stocks. Among them, Prudential and Barclays are both up about 17 per cent since November 7.

According to analysis from Hargreaves Lansdown, faltering investor confidence in London also suffered from factors running over the longer term, including “widespread concern” that loose monetary policy has distorted asset prices leading to a perception of a “peacock market, which is all puff and no substance”.

The UK asset manager’s regular Investor Confidence Index fell to its lowest level since its inception in 1995 during the month, taking out its previous nadir which came in March 2008 during the financial crisis.

Laith Khalaf, Hargreaves’ senior analyst, said: “People remain suspicious of the stock market since it has been driven up by liquidity provided by central banks.”