Footsie hits new all-time high as recession fears ease
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Footsie hits new all-time record as top think tank predicts UK will avoid recession – albeit narrowly
The London stock market hit a new all-time high yesterday on hopes that Britain will avoid a recession.
In another upbeat session for savers with money tied up in stocks through pensions and other investments, the FTSE 100 index hit an intraday high of 7934 in early trading.
It later fell back to close 20.46 points on the day at 7885.17. The latest rally came when the National Institute of Economic and Social Research said Britain will avoid a recession this year, albeit narrowly.
Record High: In another upbeat session for savers with money tied up in stocks through pensions and other investments, the FTSE 100 hit 7934 in early trading
Investors were also cautiously optimistic about the interest rate outlook after statements by the leader of America’s powerful central bank.
US Federal Reserve Chairman Jerome Powell said Tuesday night that 2023 should be a year of “significant falls in inflation,” a major boost to the global economy.
That fueled hopes that interest rates around the world could be at or near their peak after aggressive hikes over the past year as central banks battled to bring skyrocketing inflation back under control.
However, the Footsie gave up some of its gains as analysts sounded cautious about the outlook.
Of particular concern was Powell’s warning that interest rates should move higher than expected if inflation proves to be more stubborn.
George Lagarias, chief economist at consultancy group Mazars, said: “The FTSE 100 broke another record, following the general global equity rally.
Despite the buoyancy, investors should pause and think: What is driving the positive sentiment?
‘Currently it is actually one factor: the belief that we are at, or very close to, the peak of interest rates.
However, none of the major central banks have yet confirmed that they are pausing rate hikes. Given that we are in the middle of an economic slowdown and possibly a recession, we would approach the rally with optimism but also with great caution.”
And Susannah Streeter, a market analyst at Hargreaves Lansdown, warned of further volatility ahead as the mood shifts between hope that interest rates, particularly in the US, are close to a peak, and concerns about further hikes.
“Underlying concerns about how high rates will have to go are bubbling to the surface again,” she said.
“The fluctuating sentiment will continue as investors wait for new data to trickle in, which they hope will shed new light on the direction of the Fed’s policy.”