The FTSE 100 stock index has hit a record high, lifted by investors betting that a weak pound will help UK firms abroad and that the worst of the cost of living crisis has passed.
The benchmark UK index reached its highest ever intra-day level of 7,906.58 — beating the 7,903.5 points set on May 22, 2018 — around an hour after unexpectedly strong jobs figures from America was released on Friday.
It closed at an all-time high of 7,901.8, up 1.04% during the session, topping the previous peak closing figure of 7,877.45 set on the same day four-and-a-half years ago.
The milestone follows years of the UK lagging other big financial markets.
However, the shares have benefited from a weaker pound. That is because the index on the London Stock Exchange has many firms with big footprints overseas. A weak pound makes goods they export cheaper for foreign buyers and helps inflate the value of business done elsewhere.
The FTSE 250, which includes more domestically focused firms, has yet to return to its 2021 highs.
The latest bout of good news for the global economy came in the form of the US jobs announcement. On Friday afternoon the Bureau of Labor Statistics reported 517,000 jobs were added in January, more than doubling the 185,000 expected.
At the same time the rate of US inflation appears to have peaked and stood at 6.5% in the first month of this year.
“You might be forgiven for wondering why champagne corks are popping after what’s been a pretty gloomy week for the UK economy, but markets aren’t mired in the here and now, they’re forward facing and investors like what they’re seeing on the horizon,” said Danni Hewson, AJ Bell financial analyst, speaking to The Times.
“Interest rates might have risen for the tenth time, inflation might take until the autumn to appreciably cool, but the fact that the Bank of England is forecasting that the oncoming recession won’t last as long as they’d feared is cause for celebration.
“Also, the reopening of China will lead to huge demand for commodities, so you’re going to see commodity stocks up, and that’s going to really help UK equities.”
Companies reporting today
- Activision Blizzard - Q4 results