The FTSE 100 posts a second straight closing high
- Easing tensions in the Middle East and hopes for an interest rate cut are boosting market gains
The FTSE 100 closed at a new record high of 8,044.81 on Tuesday as easing tensions in the Middle East and hopes of looming interest rate cuts boosted momentum.
Positive business updates and new data showing easing food price inflation helped extend the rally from Monday and helped Britain’s leading stock market index post two record days in a row.
The FTSE 100 also hit a new intraday high of 8,076.52 earlier in the session.
It follows a 1.6 per cent gain on Monday, with the FTSE 100 closing at 8023.87. eclipsing the previous record of 8,014, set in February last year.
New high: On a banner day for savers with money tied up in shares through pensions, Isas and other investments, the blue chip index closed up 1.6% or 128.02 points at 8023.87
The FTSE 250 posted healthy gains to close 1 percent higher at 19,799.72 amid yet more takeover activity, although still a long way from its September 2021 peak of 24,353.
Lindsay James, investment strategist at Quilter Investors, said: ‘With economic growth still lagging behind many of its G7 peers, Britain has thrown its weight behind the battle against inflation, which fell below that of the US last month and Governor Andrew Bailey announces that this data shows Britain is “very much on track” with the central bank’s forecasts.
Economic factors close to home also played a role, as investors counted on the Bank of England to continue cutting interest rates in the coming months.
According to financial market betting, there is a 50 to 50 chance that the first UK rate cut will come in June and a 75 per cent chance that it will be in August, pushing interest rates down from a 16-year high of 5.25 percent goes to 5 percent.
It is then expected that rates will drop to 4.75 percent or possibly 4.5 percent by the end of the year.
The prospect of lower interest rates caused stock prices to rise as investors looked to the stock market for better returns.
On Monday, as the Bank of England expected to cut interest rates in the presence of the US Federal Reserve, the pound fell for the first time since November to $1.23 against the dollar. However, at close on Tuesday it was $1.24.
A weak pound tends to boost the Footsie, as many of the major multinationals on the index earn their earnings in a foreign currency.
The lower the value of sterling, the more these earnings are worth when converted into pounds.
Susannah Streeter, head of money and markets at broker Hargreaves Lansdown, said: ‘London’s blue-chip index has seen a surge in power as heightened geopolitical tensions have eased and investors assess the brighter prospects for the UK economy as rate cuts are spied . on the horizon.’