FTSE 100 ends 2023 on a high as Rolls-Royce and M&S make a grand revival

The FTSE 100 has posted its third straight year of gains – boosted by spectacular turnarounds from UK stalwarts Rolls-Royce and Marks & Spencer.

London’s leading share index ended its final trading session of 2023 at 7733.2, which was 3.8 per cent, or 281.5 points, higher than at the end of last year.

That represents a £71billion increase in the combined value of its constituent companies.

The more domestically focused FTSE 250 gained by 4.4 per cent over the year.

Gains: London’s leading share index ended its final trading session of 2023 at 7733.2, which was 3.8 per cent, or 281.5 points, higher than at the end of last year

However, the UK indices have under-performed when compared with US and European rivals – something that will not help efforts to stop an exodus of UK-listed companies to overseas stock exchanges.

It has been a strong year for the pound, which has climbed by more than six cents, or 5 per cent, versus the US dollar to more than $1.27, its best performance since 2017.

In stocks, engine maker Rolls-Royce has more than trebled in value over the course of the year under new chief executive ‘Turbo’ Tufan Erginbilgic.

The eye-popping increase has come after Erginbilgic, who famously described the company as a ‘burning platform’ soon after he arrived, announced proposals to cut costs, axe jobs, and fatten profit margins.

At the same time the company has benefited from the recovery in air travel after the pandemic.

Meanwhile, Marks & Spencer, under chief executive Stuart Machin, has reclaimed its sparkle with shares more than doubling amid signs that efforts to revive its womenswear sales are finally paying off.

However, at 272.4p the stock is still only just getting back to where it was in 2019.

The wider FTSE 100, meanwhile, has been buoyed in recent weeks by growing hopes of interest rate cuts by major central banks next year.

On a day of thin market activity yesterday, it was up by a modest 10.5 points.

But over December as a whole it has risen by a bumper 3.7 per cent, its best monthly performance since January, helping to put a positive gloss on the year as a whole.

The topsy-turvy 12 months saw the index climb to more than 8,000 points in February in a barnstorming start to the year before a banking crisis that claimed the scalps of America’s Silicon Valley Bank as well as Swiss giant Credit Suisse dragged it lower.

Traders have also been preoccupied by when central banks in the US, UK and Europe will start to cut interest rates.

Growing signs that they will start to do so from next spring have spurred the latest rally. They have also boosted demand for bonds, whose yields fall as their prices rise.

In charge: Tufan Erginbilgic is the chief executive of Rolls-Royce 

Yields on ten-year UK bonds were yesterday on course for their biggest monthly fall since 2008, when the Bank of England was cutting rates during the financial crisis.

But the rally for London stocks has been paltry compared to those elsewhere.

In New York, shares have this week climbed either to, or close to, all-time highs.

And Wall Street’s S&P 500 index is up by 25 per cent this year, while Germany’s Dax has risen by more than 20 per cent.

Susannah Streeter, head of money and markets at Hargreaves Lansdown, said: ‘The FTSE 100 has stumbled over the line, eking out a modest gain for the year but failing to shoot the lights out.’

Streeter said the FTSE’s gain this year was a ‘paltry rise’ compare with global peers.

‘The FTSE 100 reached the heady heights of 8047.06 in February but has struggled to regain its form,’ she added.

‘Britain’s blue-chip index still appears unloved with attention grabbed by the bright lights of Wall Street and the tech heavy make-up of New York’s exchanges, with a frenzy for all things AI fuelling buying behaviour.

‘Even though the Brexit hangover has eased, the UK’s stagnating economy and volatile political scene of recent years appears to be putting off investors.’