FTSE 100 nears record high, bolstered by interest rate optimism.
The FTSE 100 surged towards a record high on Tuesday morning as new economic data sparked hopes of further interest rate cuts from the Bank of England. The UK’s leading market rose by as much as 0.5 per cent in early trading, reaching 8,875.73 points, poised to surpass March’s record close of 8,871.31 points. York-based builder Persimmon led the gainers, climbing three per cent, with Barratt, Redrow, and Taylor Wimpey each increasing by two per cent. The mid-cap FTSE 250 also rose by 0.4 per cent to 21,373.28 points in early trading.
This movement followed economic news indicating a rise in the unemployment rate to 4.6 per cent from 4.5 per cent, and wage growth reaching 5.2 per cent in April. Matt Britzman, senior equity analyst at Hargreaves Lansdown, commented that the rallies were driven by hopes that easing wage pressure would prompt further rate cuts from the Bank of England.
However, the prospect of rate cuts posed challenges for lenders, who struggled with losses. NatWest fell over one per cent, while Barclays and Standard Chartered dropped around 0.8 per cent. Danni Hewson, head of financial analysis at AJ Bell, noted that although wage growth has decreased, it still surpasses inflation. Despite the prevailing expectation of no cut at the Bank of England’s meeting next week, the softening labour market and cooling wage increases have heightened anticipation that the MPC might deliver another cut later in the summer.
Rolls-Royce provided a lift to the London market, rising nearly two per cent after being named the winning bidder for UK small nuclear reactors. Conversely, gold miners were among the largest fallers, with Fresnillo down nearly three per cent and Endeavour over one per cent. Gold prices have been buoyed by the weakening US dollar, but amid impending trade talks between the US and China, the price retreated to around $3,330 from $3,400 last week.
