The FTSE 100 has ended its long wait to achieve a new record high.
The index, which comprises the 100 most valuable companies on the London Stock Exchange, closed at 8,023 points after jumping 128 points, or 1.6%, in Monday’s session.
This was the highest closing total since February last year When the 8,000 barrier was broken for the first time in its history.
The previous record was 8,012.
Monday’s performance was driven by a strong performance by financial and consumer-linked stocks of various companies, especially retailers.
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The index has been rising in recent weeks due to rising expectations of a UK interest rate cut inflation Easy – with strong evidence that the economy has turned a corner recession During the second half of last year.
Analysts attributed the rise to new highs to two main factors; Confidence that a major escalation in the Middle East conflict will be avoided leads to a weakening in the value of the pound against the US dollar.
Sterling is trading at a five-month low of just $1.23 against the greenback, down half a cent on the day.
This is a result of the dollar strengthening against the pound’s weakness as expectations are rising across the Atlantic that the Federal Reserve’s expected interest rate cuts will be further down than anticipated.
Higher interest rates are supportive of the currency, which in this case, is the world’s reserve currency.
A weaker pound helps FTSE 100 component companies that make money in the United States.
This is because when those dollar earnings are booked back in the UK and converted into pounds it increases their bottom line.
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The FTSE has largely lagged its rivals in growth since Brexit and continued economic shocks, but is making some gains this year due to lower valuations compared to peer stocks abroad. Is.
The lack of technology companies – which have been performing best globally since the pandemic – has been another factor behind the FTSE’s underperformance.
Trading Hub also points to the competitive disadvantage caused by the 0.5% transaction tax on share purchases in UK companies.
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Russ Mould, investment director at AJ Bell, was asked whether the weak pound had contributed to Monday’s record high for the FTSE 100.
The index traditionally struggles in times of world economic uncertainty because its 100 constituents are dominated by companies whose fortunes are directly tied to demand for basic commodities such as mining and industrial stocks.
However, the signs of growth that are beginning to emerge are positive not only for the FTSE 100 but also for pension pots.
The broader and more domestically focused FTSE 250 has yet to climb above the 20,000 mark, but it gained 1% on Monday.
Suzannah Streeter, head of currencies and markets at Hargreaves Lansdown, said of the outlook ahead: “With UK growth showing no signs of slowing and inflation pressures showing signs of easing, an interest rate cut remains a possibility. There is optimism heading into the summer, which has helped push the FTSE 100 higher.
“As borrowing costs are forecast to ease later this year, housebuilders have also risen sharply amid expectations that strong demand for new homes will return amid a slightly more positive outlook for the economy.
“Ocado, J Sainsbury’s, Next, Marks & Spencer and Tesco have also been dropped amid hopes of more favorable conditions for consumers.
“A handful of FTSE 100 listed companies, which hit record levels at the start of the month, are set to climb back to those heights, such as Rolls-Royce and BAE Systems. Aerospace stocks are set to climb higher after the ongoing conflicts and the pandemic The demand has been given.”
