FTSE 100 nears record high as inflation fears fade | Stock market

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The UK’s FTSE 100 neared a record high on Friday, as European markets rallied on hopes that the inflationary shock from energy prices is easing.

The blue-chip index, which includes the 100 largest London-listed companies, hit its highest level in more than four years. It touched 7,864.95 points, less than 1% from the intraday high of 7,903 points in May 2018, before closing at 7,844.07.

Global stocks have risen this year on optimism that central banks will slow interest rate increases, due to signs of easing inflation.

China’s easing of Covid-19 restrictions could also help global growth this year. This drove up commodity prices, raising shares in mining companies listed on the London Stock Exchange.

The FTSE 100 has gained about 5% so far this month, after rising about 1% in a turbulent 2022.

Sophie Lund Yates, principal equity analyst at Hargreaves Lansdown, says news that Britain’s economy unexpectedly grew in November, by 0.1%, helped the market rebound.

“The FTSE 100 is near record highs as unexpected UK GDP growth causes welcome inflation in the market,” said Lund-Yates.

Markets.com’s Neil Wilson said the weaker pound helped push the index higher, adding that “in dollar terms, we’re a long way from all-time highs.”

“Belief the Fed.” [US Federal Reserve] Wilson nears completion of rate hikes as inflation soars, and hope that China’s reopening will “spur the commodities and energy sectors” propelled the FTSE 100 toward a record high.

Investors poured their money into stock and bond funds last week, Bank of America Global Research reported, welcoming recent economic reports. He said you “don’t get any more Goldilocks” from Thursday’s US inflation report, which showed a 0.1% decline in prices during the month of December.

New US jobless claims remained low last week as well, at just 205,000, indicating that the job market in America was strong.

The annual rate of inflation in the United States fell to 6.5% from 7.1% in November, its lowest level in more than a year. This may encourage the Federal Reserve to slow down interest rate increases.

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The drop in wholesale energy prices in the past few weeks has cheered European markets, as wholesale gas prices are below levels before Russia’s invasion of Ukraine last February.

“Temporary optimism has crept back into the European outlook over recent weeks as energy prices have continued to fall and gas storage levels appear to be unusually healthy,” said James Smith, advanced market economist at ING.

. “This is also good news for the UK, which is one of the largest users of gas in Europe as a proportion of total energy consumption.”

European markets hit a nine-month high on Friday, and were on course for a second week of gains.

Optimism was boosted by data showing that the German economy grew by 1.9% last year and may have stagnated in the last quarter of 2022, meaning that Europe’s largest economy may avoid a winter recession.

US stocks have been heading for a winning week, with the technology-focused Nasdaq and broader S&P 500 on track for their best weekly performance since November. The Nasdaq posted a five-day winning streak on Thursday, the longest rally since July.

But Wall Street opened lower on Friday, after JPMorgan said a mild recession was now the central case in the macroeconomic outlook. In late morning trading, the S&P 500 fell 0.4% to 3,966.99, down 16 points.

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