FTSE 100 at highest close in a year as UK recession enters ‘rearview mirror’ – as it happened

The FTSE 100 benefited from anxiety over the Middle East today, as well as relief that the UK economy is growing, reports Susannah Streeter, head of money and markets at Hargreaves Lansdown

“The FTSE has been lifted higher by the fresh breeze in the sails of the UK economy. It’s still on a very slow course of growth but, with slender green shoots appearing, it’s benefiting stocks reliant on the financial health of consumers and companies. With growth not shooting the lights out, and inflationary pressures easing, there is still plenty of optimism around about the prospect of interest rate cuts coming in the summer, which has given the FTSE 100 an extra surge of power.

Gold’s safe-haven credentials glimmered even brighter amid concerns about an escalation of conflict in the Middle East, while Brent Crude jumped by more than 2% to hover around $92 a barrel. Investors appeared rattled in early afternoon trade over warnings about an imminent attack by Iran on Israel, but the index gained back ground to edge to a record high at the close.

The FTSE 100 has clearly regained its mojo as the defensive nature of the index comes to the fore. A large handful of FTSE 100 listed companies, which breached record levels earlier in the month, have been climbing back close to those highs, including Rolls Royce and BAE Systems. Aerospace stocks have been pushed higher by heightened geo-political tensions and post-pandemic demand. With violence having widened in the Middle East, and Ukraine appealing for more weapons to repel Russia, there is an expectation that military budgets will keep expanding. This has been reinforced by defence chiefs in Nordic countries, and the UK, calling for better military preparedness over the next decade.”

With hopes of a record FTSE 100 high dashed until at least Monday, it’s time to wrap up.

Here’s today’s main stories:

Have a lovely weekend; we’ll be back next week. GW

The UK’s blue-chip share index has failed to end the day at a new record closing high.

The FTSE 100 index has closed for the night at 7995 points, up 71 points or 0.9%.

That’s its highest closing high since February 2023, when the index hit its record high of 8,047 points (which we NEARLY hit around lunchtime).

Spirits in the City were lifted by the news that the economy continued to grow in February, with GDP up 0.1%.

This has cemented hopes that the UK will officially exit recession by growing over the first quarter of 2024, with economic institute NIESR today predicting the recession was in the ‘rearview miror’.

Jason Hollands, managing director of online investment platform Bestinvest, says improving optimism about the domestic economy helped lift stocks.

“Today’s confirmation that UK GDP expanded by 0.1% in February, following on from growth of 0.3% in January, will be seen by many as the key reason for the latest market moves as the data signals that the technical recession that the UK entered at the end of last year is almost certainly over.

But other, less cheery, factors are also lifting the FTSE 100, Hollands adds:

Heightened tensions in the Middle East with the risk of a regional war between Iran and Israel breaking out imminently, have propelled both oil and precious metal prices higher. Among the best performers in the FTSE 100 today are mining and energy stocks. As at midday, Fresnillo – the world’s second largest gold miner and largest silver producer – was the best performing FTSE 100 constituent – rising c5%, followed by major copper producer Antofagasta and Anglo American, the world’s largest platinum producer.

Energy is a major sector on the UK market, representing 12.8% of the FTSE 100, and both BP and Shell are on the rise against a backdrop of Brent Crude oil prices exceeding $90 a barrel.

Shares in BP gained 3.6% today, after Reuters reported that Abu Dhabi’s state-owned oil company had considered making a bid.

Housebuilders were also among the top risers, after JP Morgan lifted its rating on several construction firms.

Credit ratings agency Fitch has downgraded Thames Water’s parent company, Kemble, into ‘restricrive default’, a week after it missed an interest payment.

Fitch has announced that it has downgraded Kemble Water Finance Limited’s (the holding company of Thames Water Utilities Limited)) Long-Term Issuer Default Rating (IDR) to ‘Restricted Default’ (RD) from ‘C’.

Earlier this week Fitch lowered Kemble to C, which is one notch above default, while it waited to see if it made the missed interest payment on £149.8m.

Fitch adds that the rating could yet be lowered further, to D, in the absence of an agreement with lenders and bondholders, leading to bankruptcy filings or other procedures.

Oil has hit its highest level since last October tonight, amid fears of further Middle East tensions.

Brent crude has hit $92 per barrel for the first time since last October, as Israel braces for the possibility of an attack by Iran,

John Kirby, the White House national security spokesperson, has told reporters that the prospect of an Iranian attack on Israel is “still a viable threat”..

Unless stocks manage a late rally in London, we won’t get any record highs today after all.

The FTSE 100 is still having a strong day, but has slipped back to 7993 points, up 70 points today (+0.9%). That wouldn’t be enough for a closing high.

The chair of parliament’s Treasury Committee, Dame Harriett Baldwin, has welcomed Ben Bernanke’s review into the Bank of England:

Baldwin adds:

We asked the Chair of Court in June last year to commission a review of what had gone wrong with the Bank’s inflation forecasting.

We look forward to scrutinising Dr Bernanke’s review when he gives evidence to our Committee in May.”

Over in the US, consumer confidence has weakened as people remain anxious about inflation.

The University of Michigan’s consumer sentiment index has dropped this month, to
77.9, down from 79.4 in March.

Those surveyed grew more pessimistic about current economic conditions, and a little less optimistic about economic expectations.

Surveys of Consumers Director Joanne Hsu says:

Sentiment moved sideways for the fourth straight month, as consumers perceived few meaningful developments in the economy.

Since January, sentiment has remained remarkably steady within a very narrow 2.5 index point range, well under the 5 points necessary for a statistically significant difference in readings. Consumers perceived little change in the state of the economy since the start of the new year.

Expectations over personal finances, business conditions, and labor markets have all been stable over the last four months. However, a slight uptick in inflation expectations in April reflects some frustration that the inflation slowdown may have stalled.

Overall, consumers are reserving judgment about the economy in light of the upcoming election, which, in the view of many consumers, could have a substantial impact on the trajectory of the economy.

Next’s CEO, Lord Simon Wolfson, has been rewarded for the retailer’s good 2023 with a bumper pay rise.

Wolfson’s total pay rose to £4.5m for the 2023-24 financial year, up from £2.5m the year before, Next’s annual report shows. It looks to be his best year’s pay since 2016.

That included a salary of £908,000 (up from £865,000), an annual bonus of £1.3m (up from £700,000), and long-term incentive plan payouts of £2.07m, up from £704,000).

Chairman Michael Roney says the last financial year was a very good year for Next, which “materially outperformed” expectations.

Pre-tax profits rose 5% to £918m.

Wall Street has opened in the red.

The Dow Jones industrial average has dropped by 229 points, or 0.6%, in early trading to 38,229 points.

The broader S&P 500 is also down 0.6%, while the tech-focused Nasdaq is 0.8% lower.

The repricing of interest rate cut expectations continues to weigh on shares. But so do some mixed results from US banks; JP Morgan shares are down 3.6%.

Over in Germany, inflation has sunk to its lowest level in almost three years.

The annual inflation rate in Germany dipped to 2.2% in March 2024, statistics body Destatis reported this morning.

That’s down from 2.5% in February 2024, and 2.9% in January 2024, and the lowest reading since May 2021.