FTSE 100 closes at all-time record high of 7,901.8 as bumper US jobs and hopes rate rises will slow spark a surge of market optimism
The FTSE 100 hit an all-time trading high of 7,906.58 today, before slipping back to close at a record 7,901.8.
The UK’s leading blue chip index has been threatening to break its record previous daytime record of 7,903.50 set in 2018 for several weeks.
It also finished above its previous closing high of 7,877.45, after forecast-beating US jobs figures boosted hopes that the world’s biggest economy will avoid recession and combined with investor hopes that rate rises are about to stall.
The FTSE 100 finished up 1 per cent or 81.64 points, though the domestically focused FTSE 250 ended down 21.23 points at 20593.46.
New record: The FTSE 100 touched an all-time high of 7,906.58 today
On Wall Street the Dow Jones was up 32.62 at 34,086.56 as London markets closed. Germany’s DAX was off 32.76 points at 5,476.43 but France’s CAC 40 jumped 67.67 points to 7,233.94.
A pound bought $1.21 on currency markets, as the dollar rallied after today’s strong employment report.
‘A Friday feeling of optimism has surged through markets, pushing the FTSE 100 to a record high after US jobs growth powered ahead, and investors shrugged off recession worries,’ said Susannah Streeter, senior investment and markets analyst at Hargreaves Lansdown.
‘The bumper US non-farm payrolls number, coming in well above estimates, gave the Footsie another spring in its step.
‘The FTSE 100 has clearly got its mojo back after a difficult period when investors appeared to have fallen out of love with UK assets.’
Streeter said: ‘The make-up of the index, heavily weighted towards globally-focused commodities, utilities, financials and consumer giants is proving particularly attractive. Confidence has rebounded as investors eye up China’s reopening, which has helped commodity stocks amid expectations that demand will surge.’
But Streeter warned the lift in spirits may be short-lived, as worries could erupt about consumer resilience in the months to come on both sides of the Atlantic.
Richard Hunter, head of markets at Interactive Investor, said the all-time high was brief but significant.
‘It comes at a time when the UK economy is far from being in good shape. High inflation, rising interest rates, falling real wages and a cost-of-living crisis for many are real headwinds. At the same time, the country is hostage to any number of strike actions which have inevitably impacted productivity.’
But he noted: ‘The index is not an accurate barometer of the UK economy. An estimated 75 per cent of company earnings come from overseas which, coupled with the more recent weakness in sterling, means that these earnings become more valuable on repatriation.’
‘Another reason for the more recent appeal of the FTSE 100 is the relatively high level of dividends. The average yield of the index is currently 3.5 per cent, nearer to its longer-term level after the ravages of the pandemic dissipate.’
Alex Wright, portfolio manager of the Fidelity Special Situations and Fidelity Special Values funds, said the FTSE record came on the back of a very strong 2022 performance relative to other global indices
The FTSE 100 returned 10 per cent including dividends versus a 5 per cent fall for the S&P 500 and a 20 per cent drop for the Nasdaq in pounds, he said.
‘The headline figures, however, do not present the full picture and for value investors like myself, there are still plenty of investment opportunities in the UK as new records are set.’
An investment bargain on our own doorstep?
The FTSE 100 has bagged a new closing high after sinking last autumn
Jason Hollands, of investment platform Bestinvest, argues that FTSE 100 and UK stocks still have further to run, despite their strong recent performance.
He says: ‘This is quite a moment as UK equities have been unloved for several years and private investors ditched UK equity funds in their droves in 2022 against a backdrop of gloomy economic forecasts and political turmoil.
‘The unpopularity of UK equities last year with retail investors is, however, ironic when you consider the fact that the FTSE 100 was the best-performing major equity index globally in 2022 and still looks well placed for the year ahead.
‘The latest spike has been helped by optimism that an end to rate hikes is insight and signs that inflation has peaked.
‘The sector composition of the FTSE 100 is also skewed towards areas that have historically proven more defensive in tougher economic times, such as healthcare and consumer staples companies, as well as hefty exposure to the energy sector.
‘Notably, it has minimal exposure to technology, one of the hardest hit areas globally over the last year: what was once seen as the FTSE 100’s Achilles’ heel has worked strongly in its favour over the last 12 months.
‘Some may wonder whether a peak in the index might be a sign that UK-larger companies shares are now expensive and pondering whether it is a time to sell rather than buy or hold.
‘I would strongly argue that the current level of the FTSE 100 should not cause any concern: UK larger-company shares are in fact very attractively valued – a bargain on our own doorstep.
‘The FTSE 100 is currently trading on 10.2 times the 12-month forecast earnings of its constituents. This compares to a price/earnings ratio of 15.2 times for global equities.
‘This represents, a huge 33% valuation discount to the rest-of-the-world and it is also well below its own long-term average of circa 12.5 times.
‘Another positive for the FTSE 100 is a projected 12-month dividend yield of 4.5 per cent. This is the highest of any major developed equity market and it is also a healthy premium to the 3.05 per cent yield that 10-year gilts – bonds issued by the UK government – have sunk back to since their post-Mini Budget spike.
‘This whopping yield premium for UK blue chip shares over bonds is very supportive to the case for investing in UK large-cap stocks.
‘One of the simplest ways to get exposure to UK large companies is via a low-cost tracker fund such as the iShares Core FTSE 100 UCITS ETF which has 0.07 per cent annual costs.’
