The UK stock exchange hit a new record on Tuesday as investors hoped for interest rate reductions and a calming of geopolitical tensions.
The FTSE index of blue chip stocks listed in London reached 8,076 on Tuesday. This is higher than the previous high of 8,047 points in February 2023.
It ended Monday at , a new closing high.
The FTSE reached a new high as City investors expected two UK interest rate cuts this year. The first cut is now fully priced-in for August. Sir Dave Ramsden , deputy governor of the Bank of England, , predicted last Friday that UK inflation would be lower than expected in the next three-year period and stay close to the Bank’s 2% target. The headline inflation rate is currently 3.2%.
The prediction caused the pound to fall, and it fell this week to its lowest level since November at around $1.2340. This pushed up the share prices of multinational corporations whose dollar earnings were more valuable in sterling terms.
The FTSE 100 dropped from its intraday peak after Bank of England Chief Economist Huw Pill said on Tuesday that he thought rate cuts would be a long time coming.
For the second consecutive day, the FTSE 100 closed Tuesday at a record high of 8044 points.
According to financial services group Hargreaves Lansdown, investor confidence also increased this month, especially in the UK.
” The UK market has a discount of around 40% compared to other developed markets, but it is still a good investment, with high-quality firms that have global revenues and strong cash reserves. In many cases, they also pay attractive dividends and are well-covered.
The economic situation in England isn’t as good as it is in the US. However, if you are a shareholder there is an upside, as the Bank of England will likely cut interest rates earlier than the Fed on the other side of the Pond.
The top FTSE gainers on Tuesday included Primark’s owner Associated British Foods (up 9%), JD Sports (up 6%) and Ocado (5%)
The mood was also improved by the fact that there has been no further escalation of tensions in the Middle East since Israel’s attack against the Iranian city Isfahan last Friday.
Jim Reid, strategist at Deutsche Bank said that yesterday, Iran’s spokesperson for the foreign ministry stated that Israel has received “the necessary response at this point”.
The FTSE 100 has gained around 4% this year amid optimism about Britain’s return to growth in 2024 following a deep recession by the end of 2023.
It is now behind the other European indices. The Cac in France and Dax in Germany have both risen 6.5% this year.
Rolls-Royce is the leading riser in the FTSE 100 this year. The company’s shares have risen by 37% as its profits soared after it recovered.
Antofagasta, a Chilean mining company, has seen its profits rise by 28% this year due to a surge in copper prices.
Banks are doing well in 2024. Barclays is 25% higher and NatWest 29% higher since January 1.
The wars in Ukraine, the Middle East and Afghanistan have led to a rise in defence stocks. BAE Systems has seen a 20% increase this year. This is on top of the 30% jump that was made in 2023.
On 3 January 1984 the FTSE 100 index was launched at a price of 1,000 points. It quickly replaced the FT 30 Index, which was the previous barometer for market movements in London.
The FTSE 100 has a current market capitalisation of nearly £2tn. This means that its 100 constituents – from banks, miners, retailers, airlines, and housebuilders – are worth less collectively than Microsoft which has a $2.97tn market cap (£2.4tn).