FTSE 100 soars above 8,000 for first time ever

The FTSE 100 topped 8,000 for the first time ever today on hopes inflation might have peaked, allowing the Bank of England to slow or halt interest rate rises.

London’s blue chip index hit an all-time trading high of 8,003.65 today, before slipping back to close up 43.98 at 7997.83 points. The more domestically focused FTSE 250 finished up 154.36 at 20172.59.

The surge of optimism followed this morning’s news that the inflation rate slowed to 10.1 per cent in January, down from 10.5 per cent the month before and well below the 11.1 per cent peak in October.

A pound bought $1.20 on currency markets, as traders also reacted to ebbing inflation in the US, which yesterday reported a 6.4 per cent reading for January, down from 6.5 per cent the month before.

‘The FTSE 100 has jumped 6 per cent so far this year and has broken past the unprecedented 8,000 points mark for the first time,’ says Sophie Lund-Yates, lead equity analyst at Hargreaves Lansdown.

‘The over-arching reason for the increase comes from renewed optimism that inflation has peaked, which paves the way for central banks to introduce some slack when it comes to monetary tightening.

‘The UK’s inflation reading has been an important milestone given wider concerns about the country’s particularly harsh report card from the IMF recently.’

‘The recent momentum has been astounding in its speed, and highlights that the outlook for UK plc has turned a corner. Fundamentally though, sentiment could shift quickly depending on the outcome of central bank decisions.’

Laith Khalaf, head of investment analysis at AJ Bell, said: ‘The 8,000 level is a purely psychological milestone, but investors in the UK stock market will nonetheless be happily counting their coffers after a year in which it has been one of the best performing major markets.

‘Pension and Isa valuations will be looking pretty healthy thanks to the performance of the FTSE 100 and indeed the continued resurgence in the US stock market since the turn of the year.

‘This silver lining isn’t entirely shorn of a cloud however, because much of the success of the UK stock market over the last year can be traced back to Russia’s invasion of Ukraine.

‘This helped buoy the share prices of the oil and gas sector, and the financial sector too, as the fight against increased inflation has meant interest rates have also had to rise, boosting bank reserves.

‘A weak pound has also helped propel the Footsie upwards, thanks to all the overseas earnings made by the companies within it.’

John Moore, senior investment manager at RBC Brewin Dolphin, said: ‘The FTSE 100’s rise from being an out of favour index to new record highs shows how quickly the investment world can change.

‘During the Covid-19 pandemic, tech companies and growth stocks were massively in fashion – precious few of which are included on London’s main index.

‘Now, with inflation persistently high, elevated oil prices, and interest rates rising the consumer staples giants, oil and gas explorers, mining groups, and financials that make up the FTSE 100 are looking at a much more supportive near-term environment.’