The FTSE 100 is heading for another tough year in 2016, City analysts predictComments Off on The FTSE 100 is heading for another tough year in 2016, City analysts predict
City experts are forecasting another tough year for the FTSE 100, with many suggesting that low commodity prices will continue to hold back London’s blue-chip share index.
Analysts are cautious over the outlook for 2016, with no end in sight for the oil and mining downturns, and the EU referendum on the horizon.
Brenda Kelly, head analyst at London Capital Group, predicts the Footsie will fall to 5950 by the end of 2016.
“While oil and base metals floundered in 2015, until a pull-back in production couples with a demand spike, we can expect that a lot of the major FTSE constituents will remain out of favour,” she said.
“Barring some potential for consolidation in the commodity industry, this will likely keep the FTSE grounded in 2016.”
“Too many imponderables and clouds of concern prevail.”
Panmure Gordon’s David Buik predicts the index will finish next year at just 6000.
“Too many imponderables and clouds of concern prevail in the form of no inflation, which damages profit margins, resulting in limited corporate growth and likely falling dividends from energy and mining sectors,” he said.
Russ Mould, investment director at AJ Bell, is expects a 6150 finish from the Footsie next year, and fears dividend cuts at Anglo-Aussie iron ore giants BHP Billiton and Rio Tinto and drugmaker GlaxoSmithKline.
IG market analyst Alastair McCaig, who tips the index to end 2016 at 6650, warned: “Before a more meaningful effort to break above 7000 can be seen, we could well test lower levels.”
The main losers of 2015 have been mining stocks, whose beleaguered sector provided the four biggest fallers.
The hardest hit have been Anglo American, down 74% this year, and commodities trader-turned-miner Glencore, off 70%.
Both slashed shareholder payouts to cope with the rout for industrial metals prices.
Investors have speculated that oil majors could go the same way in 2016 but Panmure oil and gas analyst Colin Smith reckons the likes of Shell and BP will resist calls to slash their dividends even if low crude prices persist.
Analysts are also speculating that the EU referendum, which Prime Minister David Cameron has promised before the end of 2017, could damage business sentiment next year.
Institutional investors are renowned for shunning shares in politically uncertain times.