FTSE 100 hits record high

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The UK’s blue-chip share index has hit an all-time high of 7,906.58.

The FTSE 100 index was up 84 points or 1.1%, taking it above the previous record high of 7,903.50 set on 22 May 2018.

It gained as investors hoped that the inflation shock from energy prices may be easing and that central banks may be reaching the end of a sustained period of interest rate rises.

The FTSE has rallied in early 2023 , partly on the back of China’s decision to relax Covid-19 restrictions, which could support global growth, and a drop in US inflation.

“Over the last few months, activity news outside of the US has surprised investors to the upside,” said Stephen Innes, a managing partner at SPI Asset Management. “China is reopening much earlier and more quickly than expected, and milder weather alleviates European recession fears amid improving growth expectations”.

The oil company Shell was the top riser in afternoon trading, up 3.6%, a day after it reported a record $40bn (?33bn) profit for 2022 and announced a $4bn share buyback to return cash to investors, prompting calls for tougher windfall taxes.

The index contains the 100 most valuable companies listed in London. It was created in 1984, when it started at 1,000 points.

The FTSE 100 has a strong international focus, containing the mining companies such as Rio Tinto and BHP and the oil firms BP and Shell. It also contains utilities such as power and water suppliers, consumer-focused companies such as Unilever, the supermarkets J Sainsbury and Tesco, banks including Barclays, Lloyds, HSBC and NatWest, the pharmaceuticals firms AstraZeneca and GSK, and the industrial groups Rolls-Royce and BAE Systems.

Shares in multinationals benefited from a drop in the value of the pound on Friday, after the US economy created 517,000 new jobs in January, much more than expected.

“The slide in the value of the pound appears to be helping here with decent gains from the likes of the big US dollar earners, from healthcare and basic resources which is outperforming with Shell, Reckitt Benckiser and AstraZeneca helping to underpin the UK index,” said Michael Hewson, the chief market analyst at CMC Markets UK.

The City has shrugged off the latest increase in interest rates in the UK, US and eurozone this week.

“The reason for the optimism lies in the fact markets are forward looking, and they can see a path out of the current economic slump,” said Sophie Lund-Yates, the lead equity analyst at Hargreaves Lansdown.

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The FTSE 100 has been criticised as being a “Jurassic Park” index for its lack of cutting-edge tech companies – although that helped it avoid losses last year, when big tech valuations slumped.

It rose almost 1% in 2022, defying the wider market slump as worries over inflation and rising interest rates hit equities.

The FTSE has suffered some hefty losses over its lifetime. On Black Monday, in October 1987, it fell more than 10%, losing a further 12.2% the next day – its worst fall to date.

During the first quarter of 2020, it lost a quarter of its value, only returning to its pre-pandemic level at the end of December 2021.