On Tuesday morning, the FTSE 100 reached 8,076.52 points, surpassing its previous record of 8,047.06 set in February 2023
The UK’s leading stock market index, the FTSE 100, reached a new all-time high on Tuesday, as investors were encouraged by hopes of interest rate cuts and a decrease in geopolitical tensions.
On Tuesday morning, the FTSE 100 reached 8,076.52 points, surpassing its previous record of 8,047.06 set in February 2023. Here, we delve into what’s driving this rise and what it signifies:.
What is the FTSE 100?
The FTSE 100 is the UK’s top stock market, where investors trade shares in the country’s 100 most valuable public companies. It features well-known brands like Sainsbury’s and Marks & Spencer, oil behemoths Shell and BP, and banks such as HSBC, Lloyds Banking Group and Barclays.
What has happened?
The index has achieved a new record all-time high, reflecting the combined trading values of the companies listed on the market. The more valuable a company is, the more sway it holds over the direction of the FTSE 100 as a whole. The index’s value is measured in points.
Currently, Shell is the highest valued company in the index with a market capitalisation the total value of all of the company’s shares of £186billion. The point total of 8,076.52 on Tuesday followed a record closing high on Monday afternoon (the final score when trading ended for the day) of 8,023.87 points.
Why does it matter?
While the FTSE 100 isn’t a direct reflection of the wider economy, it does provide insight into the performance of some of Britain’s largest companies, making it a valuable economic indicator. Moreover, it can directly impact the savings of everyday people. If you have investments in stocks and shares possibly through a pension scheme some of it might be tied up in the FTSE 100. The vaule of your pension can go up as the FTSE rises and fall as it decreases.
Why has it hit a new record?
Investors have been buoyed by signs that tensions in the Middle East have eased recently, following missile strikes between Israel and Iran last week, which led to a drop in oil prices.
Analysts also attribute the surge to a decrease in the value of the pound against the US dollar. Sterling is currently trading at five-month lows against the dollar, at just 1.23 US dollars, and was half a cent down on Tuesday.
The FTSE 100 includes many large international companies whose earnings are made in dollars but reported in pounds, meaning they become more profitable when the dollar strengthens. This benefits UK-based investors and gives a lift to London stock markets.
What happens next?
Investors believe things will continue to get better. There’s high optimism that the economy will bounce back this year, after slipping into a mild recession at the end of 2023, which is also giving a boost to UK stocks.
And hopes have increased in recent months that the Bank of England will reduce interest rates over the summer as inflation starts to fall. Jason Hollands, managing director of online investment platform Bestinvest, suggested that the Footsie’s new record could “usher in a new dawn for UK equities”.
“The news is a little less gloomy for UK equities at the moment,” he stated. “And it’s high time, as UK equities have endured a long negative narrative around investor outflows, companies switching their listings overseas, and underperformance compared to the more exciting US market.”
