European equities saw the biggest inflows this week since December 2015 as investors reacted with relief to the result of the first round of the French presidential election, according to data captured by Bank of America Merrill Lynch.
Although right-wing populist candidate Marine Le Pen made the second round, her centrist opponent Emmanuel Macron is widely expected to prevail in the final run-off on 7 May.
And despite some disappointment over the vague nature of President Trump’s tax plan, inflows to equities globally, at $21bn, were the highest since the US election.
This all sounds very positive for stock markets around the world; so why hasn’t the FTSE 100 index joined the party?
After a very strong start to the week in the immediate aftermath of the news from France, the FTSE 100 has rapidly lost steam.
It is still up 1.4% overall so far this week but down 1% from its high point on Wednesday.
In comparison, the German DAX index has held on to its gains and is up 3.3% since Monday’s open.
A surging pound and this morning’s weak GDP figures have helped undermine the index.
Strength in sterling is negative for the FTSE because around 70% of the earnings from the index are derived overseas and a strong pound means these earnings are worth less when translated back.
Many investors are now looking at the new change in currency movements and contemplating whether to switch from FTSE 100 stocks into the FTSE 250. We explore this situation in the new issue of Shares, out now.
We urge you to read our feature on the ‘The Big Switch’ from large caps to mid-caps. If you are not yet a subscriber to Shares, why not try our special bank holiday offer of one month’s subscription for just £1.
