London's FTSE index seen little changed over 2008

Tue Mar 18, 2008 10:22am EDT

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By Jonathan Cable

LONDON (Reuters) - The UK's FTSE 100 share index will regain losses made earlier this year but end 2008 little changed from 12 months before as investor fears about recession leave their mark, a Reuters poll showed.

The quarterly survey of 13 equity strategists, taken last week before global markets slumped, showed the FTSE 100 index .FTSE at 5,900 by June, and then climbing to 6,500 by year end, 20 percent up from its closing value on Monday of 5414.4.

This is down considerably from the last poll conducted in December when analysts forecast the FTSE to end 2008 at 7,050. In the most recent poll forecasts ranged between 5,150 and 6,600 for the end of June and between 5,000 and 7,200 for year-end.

Global stocks nose-dived on Monday after a fire sale of stricken U.S. bank Bear Stearns BSC.N and fears that a worldwide credit crisis will claim more casualties.

UK mortgage bank Northern Rock had already become Britain's highest profile victim of the crunch after being forced to borrow from the central bank, leading to the first run on a British bank in over 140 years, and prompting the government to step in and take it under state control.

"We have entered a new uglier, scarier phase of the crisis ... The risk of a further sharp decline in the prices of most risky assets is very real," said Marco Annunziata, chief economist at UniCredit MIB.

The global credit squeeze has curbed takeover activity and dented the banking sector .FTASX8350, which has underperformed the FTSE by 27 percent since January 2007, while housebuilders have suffered from high interest rates.

But not all merger activity has stopped. Britain's main nuclear power operator British Energy (BGY.L: Quote, Profile, Research, Stock Buzz) said on Monday it was in talks over a possible offer for the 6.5 billion pound group while Brazil's Vale (VALE5.SA: Quote, Profile, Research, Stock Buzz) is discussing a $90 billion buyout of Anglo-Swiss miner Xstrata (XTA.L: Quote, Profile, Research, Stock Buzz). Continued...