FTSE 100 hits all-time high as shares rally remains strong

Retailers and financial stocks were among those making gains this morning, with only a few stocks starting the day with losses.

The FTSE 100 reached a record-breaking closing level yesterday of 8,023.87, after surging by more than 1.6 per cent.

Experts have suggested the rally could be linked to renewed hopes of UK interest rates being cut, after inflation moved further towards the Bank of England's two per cent target level.

In the year to March 2024, Consumer Price Index (CPI) inflation increased by 3.2 per cent, down from 3.4 per cent in February.

Lindsay James, investment strategist at Quilter Investors, said: “With economic growth still lagging for many of its G7 peers, the UK has turned this to its strength in the fight against inflation, which last month fell below that of the US and saw Bank of England Governor Andrew Bailey announce that this data shows the UK is ‘pretty much on track’ with the central bank’s forecasts.”

She said it has resulted in investors anticipating a cut to the UK base rate before interest rates are reduced in the US.

This has helped the pound weaken against the US dollar.

There are many large international companies in the FTSE 100 whose earnings are generated in dollars but reported in pounds.

It means they become more profitable when the dollar strengthens.

Russ Mould, investment director at AJ Bell, said today's "positive showing" is "exactly what's needed to help repair the reputation" of the UK stock market.

He added: "It’s going to be a slow process but every little helps.

“The UK has lived in the shadows of the US stock market for the past decade or more, delivering inferior returns on a relative basis as it has lacked the go-go growth stocks highly desired by investors.

"The FTSE’s low exposure to the technology sector has diminished the index’s appeal and seen investors look elsewhere for ways to turbocharge their portfolio.

“Brexit and political uncertainty have also weighed on the index, even though approximately three quarters of its constituents earn money overseas. That’s led to cheap valuations and a mountain of unloved stocks.

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"Investors are finally getting the message that a good chunk of these businesses still have a lot to offer, delivering slow but steady profit growth, and they’re available for a fraction of the price of some of their overseas peers.

“The conveyor belt of takeovers continues to trundle along and that has put the spotlight on the market.

"At the same time, many UK-listed companies are simply getting on with the job at hand, delivering earnings and dividend growth. Investors who take a long-term view are still able to find plenty of opportunities.

“UK returns may often lag what’s on offer in North America but a diversified investment portfolio shouldn’t rely on one geographic region for its gains as even winning markets like the US can go down as well as up. If you look back at history, there are times when the UK has either held firm when the US market has fallen or even pushed ahead."