FTSE 100 closes above 8,300 barrier amid global rally

London’s FTSE 100 closed at a new record high record on Tuesday amid a global stock market rally driven by renewed optimism on interest rate cuts from major central banks.

The blue-chip index closed at 8,313.67, up 1.22 per cent. Its intra-day high was 8,334.02. This means the FTSE 100 has set its eighth-record closing price of the year having closed higher in 10 of its last 13 sessions.

The index has risen 7.8 per cent so far in 2024, bouncing back from a sluggish 2023 marked by interest rate hikes and economic uncertainty.

Banks were among the largest risers on the FTSE 100 today, with Lloyds, Barclays and Natwest all rising over three per cent.

Housebuilders and property investors also gained on the back of news that the downturn in the construction sector might be coming to an end.

A survey from the construction sector showed activity expanding at its fastest pace in over a year while data from Halifax showed that house prices edged up in April.

Meanwhile, the mid-cap FTSE 250, more closely aligned with the health of the UK economy, has been trading at its highest level since last February. The index closed 1.23 per cent higher at 20,413.08.

The strong run for markets comes amid growing optimism about the state of the UK economy, with new figures out this week set to show that last year’s shallow recession has come to an end.

Economists expect figures released on Friday to show that the UK grew 0.1 per cent in March, meaning it will have notched a 0.4 per cent expansion over the first quarter of the year.

The FTSE 100’s jump followed similar rallies on Wall Street and in Asia. The S&P 500 closed one per cent higher on Monday, while the Nikkei 225 jumped 1.6 per cent.

European stocks have also rallied, with the blue-chip Stoxx 50 up 1.3 per cent. Germany’s Dax has also gained 1.5 per cent, while Madrid’s Ibex 35 is up 1.5 per cent.

Global markets received a fresh bout of rate-cut optimism on Friday after new data from across the pond signalled a cooling in the world’s largest economy. The US economy added 175,000 jobs in April, far below economists’ expectations of 243,000.

Traders have since strengthened their bets on a September rate cut from the US Federal Reserve. The Bank of England, which will meet on Thursday, is expected to cut rates by 25 basis points in August and once more before the end of the year.

New data on Tuesday also showed British consumer spending softened last month, putting more pressure on rate-setters to lower borrowing costs as their previous interest rate hikes take a toll.

“Investors now have to decide whether the UK is cheap because it (still) deserves to be cheap, or whether the times really are changing, because if they are then further welcome gains could be on the cards,” said Russ Mould, investment director at AJ Bell.

“The picture does not look quite so rosy in US dollars and while this can be used as a pretext to cavil, it can also be a further explanation of why the index is gaining fresh traction – it may still look cheap, especially to overseas buyers.”