Newspaper article The Evening Standard (London, England)

UBS Makes a Brave Call for Big Footsie Recovery

Newspaper article The Evening Standard (London, England)

UBS Makes a Brave Call for Big Footsie Recovery

Article excerpt


CITY big-hitter UBS forecasts a major recovery in share prices in 2009 despite warnings that the recession will be long and deep, and run into 2010.

It bravely predicts a 2009 year-end of 5800 for the Footsie 100 index, which has lost almost 40% of its value since hitting a peak of 6730 in October last year just days before the first of the creditcrunch sell-offs.

UBS expects GDP to contract by 1.8% next year as the banking crisis enters the stage at which lenders restrict credit to the real economy, adding: "The recession we forecast is similar to the early 1990s experience in terms of the magnitude and duration.

The UK will underperform the euro area in terms of economic activity. The UK equity market, however, is set to outperform the euro area in spite of our more bearish macro outlook for the UK." The broker believes decoupling of the macro story from the equity-market performance is mainly achievable because the UK is further into the slowdown than Europe. It also envisages an aggressive policy response in the UK.

But rival Morgan Stanley isn't taking any chances. With a bull case of 6500 points and a bear one of just 2500 for the Footsie in a year's time, analysts say the range of possible outcomes for the markets remains incredibly wide.

While equities currently look cheap on traditional valuations, Morgan won't rule out further major sell-offs as investors continue to shun the markets.

Leading shares had better start performing if they want to make up the lost ground any time soon. They were a touch softer for choice today, with all bets on hold as investors waited to see if the Bank of England will signal another full-percentage-point cut in interest rates tomorrow.

The market had to contend with a long list of blue-chips going ex-dividend.

They included Severn Trent, 35p lighter at 1100p, Vedanta Resources, 5'p higher at 537p, Land Securities, 7'p lower at 887'p, London Stock Exchange, 41'p off at 542p, National Grid, 11'p down at 601p, 3i, 21p cheaper at 375p, and Associated British Foods, 22p lighter at 637'p.

Collectively, they would have accounted for a fall of almost 2. …

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