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The FTSE 100 closed at an all-time high on Monday as rising expectations for UK interest rate cuts weakened sterling and boosted corporate valuations in London.
Britain’s blue-chip index rose 1.6 per cent to close at 8,023.87 — eclipsing the previous closing high of 8,014.31 it hit in February 2023.
The broad rally, which swept up most of the companies in the FTSE 100, came as the dollar extended recent gains against the pound. The majority of the index’s constituent companies earn their revenues in dollars and therefore benefit from a weaker exchange rate. Sterling fell 0.3 per cent to trade at $1.2333, its weakest level since mid-November.
The benchmark had underperformed rivals like the S&P 500 this year but has closed the gap this month as traders moved away from riskier assets like technology and switched into commodities, boosting some of the FTSE 100’s biggest sectors.
The FTSE 100 has gained 3.8 per cent since the start of the year, outperforming the Nasdaq Composite, which has risen 2.1 per cent. The S&P is up 4.4 per cent since January while Germany’s Dax and France’s Cac 40 are both up around 6.6 per cent.
The pound’s weakness against the dollar comes as a gap emerges in expectations for borrowing costs on either side of the Atlantic. Traders are increasingly betting that the US Federal Reserve will keep interest rates higher for longer, while the Bank of England is expected to start bringing down rates in August.
The FTSE 100 has been within touching distance of its record for several weeks, having lagged behind peers on both sides of the Atlantic for much of the past year. It is still short of its intraday high of 8047.06, also reached last February.
Oil prices — which climbed higher than $90 a barrel earlier in April for the first time since October — have boosted index heavyweights and energy giants Shell and BP. Shell alone has contributed almost a third of the FTSE 100’s gains so far in 2024.