The FTSE 100 has secured a new record closing high after riding out a US trade war-linked slump.
The index of London’s leading shares gained 20 points to hit 8,884, surpassing the 3 March peak of 8,771 and leaving its value more than 8.6% up in the year to date.
It was achieved despite gloomy official figures covering April – when the impact of the US trade war started to be felt, household bills spiked and budget tax and wage rises hit employers for the first time.
The Office for National Statistics reported that the economy contracted by 0.3%.
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The FTSE 100 tumbled early in the spring when Donald Trump‘s protectionist agenda gathered steam through a series of on-off tariffs against global trading partners, later exacerbated by his “liberation day” escalation.
Stock market values were hit worldwide as the consequences for domestic economies – and global activity – were digested amid a slew of output downgrades by respected international bodies such as the International Monetary Fund.
But the suspension or reductions of many trade tariffs, coupled with select deals to end hostilities with nations such as the UK, has helped values climb back since last month.
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A new high for the UK’s top flight shares was almost achieved on Wednesday, as a limited trade truce between the US and China was on the table following talks in London.
But market analysts said on Thursday that the optimism was overtaken by nerves around whether the progress could be maintained and a surge, of up to 4%, in global oil prices due to growing tensions between the US and Iran.
Mr Trump has repeatedly warned the country it is at risk of airstrikes by the US and Israel if it is found not to be complying with its nuclear obligations.
A United Nations report has made such a finding – and some US personnel have been evacuated from the Middle East region as a result.
The spike in oil costs late on Wednesday, which took the Brent crude international benchmark to a two-month high, lifted the values of energy-linked shares including those of BP and Shell early on Thursday.
Precious metal miners were also doing well.
Tesco was among the winners too, gaining almost 2%, thanks to a solid set of first quarter results.
Weaker than expected US inflation figures yesterday, which kept the prospect for a summer interest rate hike by the Federal Reserve intact despite the continuing trade war, also helped prop up sentiment internationally.
The outlook for UK and global stock market values, however, is very uncertain.
FTSE 100 firms make the bulk of their earnings overseas so a deep-seated trade spat between the world’s two largest economies is particularly damaging.
The big risks to listed companies have all been related, in some way, to trade war exposure since the start of the second Trump administration.
Neil Wilson, UK investor strategist at Saxo Markets, said of the record high: “I think we have clearly seen a rotation in global equity markets as investors have for the first time in years questioned the TINATA – there is no alternative to America.
“Investors are looking elsewhere and consistently conversations with clients revolve around geographic diversification and reducing exposure to the US.
“Of course there are alternatives to the UK – we should note that while the FTSE is up over 8% YTD [year to date], the DAX has rallied almost 20%, but clearly the UK has picked more than a few crumbs.
“More than this, it’s got some attraction from a value, income and defensive perspective given the volatility we have seen and changed macro backdrop and assumptions about US exceptionalism.”
