While Global Stock Markets in France, US, and Japan Surge... Only UK Stagnates

Britain Trapped in the Quagmire of Stagflation

While major stock markets around the world, including the United States, have been on an all-time high upward trend in the first half of this year, a decoupling phenomenon has emerged where only the UK stock market is stagnating.

As of the closing price on the 28th (local time), the UK FTSE100 index rose only 0.65% compared to the beginning of the year, whereas major global stock markets such as France, Germany, the United States, and Japan showed increases ranging from 13% to 28%.

The Nikkei 225 index, representing the Japanese stock market, surged more than 27% since the beginning of the year, enjoying strong momentum. The market has been shielded from geopolitical tensions such as the escalating US-China conflict, and favorable factors such as the Japanese government's stock market stimulus measures and Warren Buffett, known as the "Oracle of Omaha," concentrating investments in Japan's five major trading companies have attracted overseas capital. The rate of increase became steeper since April, with the index recently jumping nearly 21% from the lowest point in the past three months (27,518.31). The index surpassed the 33,000 mark (closing price basis) for the first time last month, setting the highest record in 33 years since the collapse of the bubble economy in July 1990.

The US S&P 500 index has risen 14% so far this year, led by strong performances from the seven major big tech stocks (Apple, Nvidia, Tesla, Alphabet, Microsoft (MS), Meta, and Amazon). Their combined market capitalization accounts for one-quarter of the total market cap of all S&P 500 companies. David Rosenberg, founder of Rosenberg Research, evaluated that "the US stock market this year has moved according to short-term momentum led by tech stocks."

The French CAC40 index rose nearly 13% this year, supported by rallies in luxury stocks such as Louis Vuitton Mo?t Hennessy (LVMH), while the German DAX30 index increased about 15% despite fears of a recession.

In contrast, the UK FTSE100 index has shown a sluggish trend, unable to escape the impact of interest rate hikes and lacking momentum. While the US and other European countries have solidified a recovery in their stock markets amid relief that inflation has peaked, pessimism about the difficulty of stabilizing prices in the UK has spread, leading to a stronger tightening stance.

The UK's inflation rate has exceeded market expectations for four consecutive months, and strong tightening measures have increased concerns about a recession. Due to inflation rising beyond market expectations, the Bank of England (BOE), the UK's central bank, raised the base interest rate by 0.5 percentage points to 4.5% at its monetary policy meeting on the 22nd. The market expects the UK's terminal interest rate to reach the 6% range. The decline in oil prices, which caused a significant drop in the energy and mining sectors, also contributed to the FTSE100 index's decline. Among FTSE100 constituents, mining companies such as Fresnillo, Anglo American, and Glencore have posted the worst performances this year.

Experts expect the decoupling of the UK stock market to continue into the second half of this year. Barclays stated, "The outlook that it will be difficult to escape the quagmire of stagflation (rising prices amid recession) dominates the UK stock market," and predicted, "Given the lack of noteworthy momentum in the short term, investors' neglect is likely to continue for the time being."

This content was produced with the assistance of AI translation services.