FTSE 100 inches closer to new high as markets cheer Chinese stimulus
- The Politburo follows the Chinese central bank in its efforts to remedy the weak economy
- But lower oil prices are weighing on the FTSE 100, limiting blue chip gains
- The Federal Reserve’s favorite measure of U.S. inflation fell to 2.2 percent
The FTSE 100 capped a week of gains on Friday as global markets headed higher on hopes of further looming rate cuts and a major Chinese stimulus package.
The blue chip index opened higher following continued outperformance in Asian markets overnight, ending up 35.85 points at 8,320.76.
The FTSE 100 hit a record high of 8,445.8 on May 15, when the Bank of England was expected to go ahead with its first key rate cut ahead of the US Federal Reserve, combining with a weaker pound sterling to boost exporters.
The Federal Reserve’s favorite measure of US inflation comes in at 2.2% as major Chinese stimulus boosts global markets
China’s Politburo leaders said Thursday they will step up “necessary budget spending” to help meet the world’s second-largest economy’s 5 percent annual growth target.
It follows a period of deterioration in economic figures, fueled by crises in China’s vast real estate sector.
The government intervention comes after the Chinese central bank on Tuesday pulled the trigger on stronger-than-expected monetary stimulus measures, including interest rate cuts and the relaxation of some mortgage rules.
This has pushed China’s CSI 300 and Hong Kong’s Hang Seng indices 14.5 and 13.5 percent higher respectively since the market close on Monday.
The impact on the FTSE 100 has been limited so far, largely due to lower oil prices weighing on the index. Brent oil is now trading around $71 per barrel, after falling more than 24 percent over the past year.
However, the FTSE 250 has benefited from China-exposed stocks such as Burberry and Prudential.
Richard Hunter, head of markets at Interactive Investor, said: ‘There will obviously be some time between the announcement of the stimulus package and its effects rippling through the economy, but the very fact that the authorities have moved away from their previous inertia has both stimulated both domestic and international markets.
“Chinese blue chips…(are at their) highest levels since around the time of the global financial crisis in 2008, while the positive resonance has spread to most commodity prices and sectors with high Chinese exposure globally.”
Meanwhile, eurozone figures today show a mixed picture: French consumer prices are rising less than expected, Spanish inflation is falling to 1.7 percent and German unemployment is growing slightly above expectations. Stock markets across the bloc rose in early trading.
The US personal consumption expenditures (PCE) price index – the Fed’s preferred inflation measure – fell more than expected to 2.2 percent in the year to August.
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