The FTSE 100, the main index of the London Stock Exchange, was rising on Friday and was approaching its historic record, reached in February 2023, driven by hopes of interest rate cuts this summer by the Bank of England.
The British central bank chose Thursday to maintain a high key rate, 5.25%, continuing its effort to bring inflation in the United Kingdom back to its target of 2%, but suggested that monetary easing was approaching.
Encouraged by inflation falling sharply since its peak of more than 11% at the end of 2022, 3.4% over one year in February, the market is speculating on a first rate cut in June, which will ease the stranglehold on credit and therefore on a British economy falls into recession at the end of 2023 – but which is already showing signs of rebound.
The FTSE 100 was up 0.45% to 7,918.34 points at mid-market on Friday, closing in on its all-time high of 8,047.06 points reached on February 16, 2023.
After a stunning session on Thursday, the FTSE 100 continued its rise on Friday as confidence grew that we will soon see rate cuts, commented Russ Mould, analyst at AJ Bell.
The appetite for risk increases, businesses become more optimistic and people make money. This environment is favorable to the equity markets, he continued.
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The London index was notably boosted on Friday by the surge of nearly 10% in Phoenix Group Holdings, insurer and pension fund manager after the announcement of a very sharply reduced net loss in 2023 and an increase in its dividend.
Several world stock markets have reached new records in recent days, driven by hopes of rate cuts. By comparison, the FTSE, lagging behind its peers in 2023, is cheap with a more favorable price-to-company earnings ratio, notes Kathleen Brooks, analyst at XTB.
The analyst adds that certain members of the FTSE 100 have had a very good year in 2024 so far, citing in particular the aircraft engine manufacturer Rolls-Royce (+40%), the insurer Beazley (+32%) or the sports betting gauntlet Flutter (+23%).