The London stock market powered on to a new all-time high this morning on growing confidence that the Bank of England will start cutting interest rates this summer.
The FTSE 100 index of leading company shares jumped to a new intra-day record of 8,076, up 53 points in early trading, before settling back a little.
The new benchmark comes hard on the heels of a strong session yesterday when the FTSE 100 ended at a closing high of 8,023, 128 points higher. The mood of optimism was further boosted by strong PMI business survey numbers showing output growing at its fastest rate since May 2023.
David Cumming, head of UK Equities at Newton Investment Management, said: “The new market high has been a long time coming but despite the global uncertainty this has the potential for being a new dawn, rather than a short term blip. “The UK is cheap, relative to other markets, while relative trends in commodity prices and interest rates now favour the UK’s company mix as the global tech rally fades.
“For the UK consumer, in the nearterm things are looking up — with recent tax cuts, lower inflation figures and rising earnings. Retailers such as Tesco, with exposure to these trends, were notable upward gainers today. The recent rise in bid activity is a further positive valuation signal for the FTSE”.
Russ Mould, investment director at brokers AJ Bell, said: “No sooner had the FTSE 100 hit a new record closing level, the blue-chip index has now scored another goal by achieving a new intraday high at 8,076.
“This positive showing is exactly what’s needed to help repair the reputation of the UK stock market. It’s going to be a slow process but every little helps.”
Hopes have been growing in recent days that the Bank of England will finally start easing the pressure on the economy with a rate cut by the summer, possibly as early as June. Interest rates have been stuck at 5.25% since last August, helping to push the UK economy into a mild recession in the second half of the year.
Markets currently rate the chance of a cut in June as about 50-50. The fall in the value of the pound against the dollar on expectations that the Bank will move ahead of the USD Fed has also ignited investor interest in major UK companies that make most of their earnings in dollars.
But today’s preliminary survey data from the closely watched UK PMI Composite Output Index, showed solid growth suggesting that the recession was not extended into 2024.
The index for April read 54, up from 52.8 in March and the strongest since May 2023. A reading above 50 points to growth.
