FTSE Edges towards new high

As ever the Finance markets are often very unpredictable. The past month has seen a full recovery on the main market in London of all the losses from the credit crunch; this is despite the ongoing problems at Northern Rock (borrowing more from the government with every passing day) and the troubles in the commercial paper market.

Why, then?

Well, for one thing the US 0.5% interest rate cut has stimulated demand in the US and pushed up the Dow and Nasdaq. Also a weakening dollar is starting to help US exports. This partially explains the UK markets as we follow the US closely as an Anglo-Saxon economy.

If you look at this graph too, you can seen the sector split too. Mining has been very good (not that I can advise, but nearly all my small investment capital is in Gold and Natural Resources) as have Oil and Financial Services. You may wonder at Financial services but the banks until this quarter have been making record profits and the Life sector has picked up too.

Is this a dead cat bounce though? Always hard to predict. The FTSE All-Share is up 12% on the year so far, with the Samll Caps much less buoyant then the FTSE100. Times look tougher ahead into the new year. If houses prices do go down thought then shares will look a better asset class, so there may be some odd feedback support for a little while.