FTSE to drop to 5,000 by end of 2013, predicts Capital Economics

Stockmarket FTSE 450

Macro-economic research agency Capital Economics has forecast the FTSE 100 index to drop to the 5,000 mark by the end of 2013, down from its current level of 5,870.

Senior markets economist John Higgins says: “We expect a weak economy and a partial break-up of EMU [the European monetary union] to weigh on UK equities through the end of next year – our forecast is that the FTSE 100 will end 2013 around the 5,000 mark.

“Although we are clearly cautious, one reason we do not expect a bigger drop in the index from its current level of around 5,870 is that valuations appear attractive, at least in relative terms.

“Indeed, once the darkest clouds over Europe have lifted, we expect the FTSE 100 to rebound to around 5,500 in 2014.”