U.K. Stock Traders See Rebound As Economy Optimism Trumps Greece
Sofia Horta E Costa Writes:
With Greek talks dragging down most of Europe?s stock markets, investors have increasingly seen the U.K. as a haven.
Options traders are paying the least ever to hedge against swings in the FTSE 100 Index relative to euro-area shares. While the Greek impasse has helped push U.K. shares to a five-month low this week, investors are preparing for a rebound. An exchange-traded fund tracking the equities received $483 million last week, the most in two years.
A pick-up in the economy is fueling speculation earnings growth will improve. After Prime Minister David Cameron unexpectedly won another term with a majority in parliament, Britain would be basking in post-election optimism if it weren?t for Greece, according to Tim Rees at Insight Investment Management in London. The U.K. is also attracting currency traders, with the pound at a seven-month high against the dollar.
?Greece is making everyone nervous, but you would assume that the U.K. is more withdrawn from the issue than the euro zone,? said Rees, Insight Investment?s U.K. equities director. ?The economy is picking up nicely — unemployment is tumbling and wage growth is showing signs of life. That can hurt the FTSE 100 now because of the pound move, but isn?t growth always good??
U.K. stock investors enjoyed a brief rally after ticking off the country?s May election, before they were hit with more politics, from Greece this time. Since its April record, the FTSE 100 has dropped 5.6 percent, less than the 8.5 percent decline in the Euro Stoxx 50 Index.