The UK’s blue-chip share index hit an all-time high of 7,906.58 on Friday, amid hopes that global inflation is easing and central banks may be reaching the end of a sustained period of interest rate rises.
The FTSE 100 peaked at that level before ending the day at a new closing high of 7,901.80. Both the intraday high and the closing high were above the previous record set on 22 May 2018, when the FTSE 100 closed at 7,877.45.
It gained as investors hoped that the inflation shock from energy prices may be easing and that central banks may coming to the end of a period of aggressive rate hikes.
“Despite last year’s equity market volatility and a slowing global economy, the FTSE 100 is defying the doom and gloom,” said Victoria Scholar, head of investment at Interactive Investor.
The FTSE has rallied in early 2023 , partly on the back of China’s decision to relax Covid-19 restrictions, which could support global growth, and a drop in US inflation.
“Over the last few months, activity news outside of the US has surprised investors to the upside,” said Stephen Innes, a managing partner at SPI Asset Management. “China is reopening much earlier and more quickly than expected, and milder weather alleviates European recession fears amid improving growth expectations”.
The oil company Shell was among the top risers on the FTSE 100 on Friday, up 3.3%, a day after it reported a record $40bn (£33bn) profit for 2022 and announced a $4bn share buyback to return cash to investors, prompting calls for tougher windfall taxes.
The index contains the 100 most valuable companies listed in London. It was created in 1984, when it started at 1,000 points.
The FTSE 100 has a strong international focus, containing the mining companies such as Rio Tinto and Anglo American and the oil firms BP and Shell. It also contains utilities such as power and water suppliers, consumer-focused companies such as Unilever, the supermarkets J Sainsbury and Tesco, banks including Barclays, Lloyds, HSBC and NatWest, the pharmaceuticals firms AstraZeneca and GSK, and the industrial groups Rolls-Royce and BAE Systems.
Shares in multinationals benefited from a drop in the value of the pound on Friday, after the US economy created 517,000 new jobs in January, much more than expected.
“The slide in the value of the pound appears to be helping here with decent gains from the likes of the big US dollar earners, from healthcare and basic resources which is outperforming with Shell, Reckitt Benckiser and AstraZeneca helping to underpin the UK index,” said Michael Hewson, the chief market analyst at CMC Markets UK.
The City has shrugged off the latest increase in interest rates in the UK, US and eurozone this week, with shares boosted by signs that the Bank of England may be close to ending its interest rate rises. The hope is that as inflation eases and rate hikes come to an end, the downturn this year in the UK will be shallower and shorter than was previously feared.
“The reason for the optimism lies in the fact markets are forward looking, and they can see a path out of the current economic slump,” said Sophie Lund-Yates, the lead equity analyst at Hargreaves Lansdown.
The FTSE 100 has been criticised as being a “Jurassic Park” index for its lack of cutting-edge tech companies – although that helped it avoid losses last year, when big tech valuations slumped.
It rose almost 1% in 2022, defying the wider market slump as worries over inflation and rising interest rates hit equities.
The FTSE has suffered some hefty losses over its lifetime. On Black Monday, in October 1987, it fell more than 10%, losing a further 12.2% the next day – its worst fall to date.
During the first quarter of 2020, it lost a quarter of its value, only returning to its pre-pandemic level at the end of December 2021.
• This article was amended on 8 February 2023 because an earlier version cited BHP as a FTSE 100 company. The mining company left the FTSE 100 index in 2021.
