The UK’s FTSE 100 share index reached a record high in four years on Friday as hopes of easing inflation bring ease to European markets.
The index was described as “flirting” with its record closing high of 7,877, close to the record intraday high of 7,903 points in May 2018. The index closed at 7,844.07.
By Friday, the FTSE 100 gained around 5% so far in January, compared to a rise of 1% in 2022.
Susan Streeter, senior investment and market analyst at Hargreaves Lansdown, said the record 7,877 is in reach, and “another surge in buying could see stocks surpass the best level” of May 22, 2018.
Expectations of cooling inflation heightened after encouraging data from the US last week, resulting in Wall Street ending high on Friday and raising trading levels in Asia on Monday.
After a tumultuous 2022, UK investors’ confidence has rebounded with the backdrop of China’s opening, and a boost in consumer appetite is benefitting the retail, travel and hospitality sectors.
The rising confidence may not be long-lived, said Streeter. “The snapshot of UK consumer prices due on Wednesday will be closely watched as an indicator of whether the Bank of England will judge it necessary to keep ramping up interest rates from next month”, she added.
Clearly, more vulnerable sections of society are currently facing a “super-tough” time, and global political and business leaders assembled in Davos are concerned about the cost-of-living crisis and the severity of the incoming global downturn, Streeter said.
The issues arising from inflation are set to take centre stage at this week’s World Economic Forum meeting. There are rising concerns that government incentives to mitigate the effect of painful inflation for citizens will mean less for governments to spend on sustainability, which could lead to destabilising protests, Streeter warned.
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