A decent showing on Wall Street following news that US consumer prices dropped in December helped to lift investor sentiment in Asia and Europe on Friday. Investors are desperate for inflation to ease back so that central banks no longer have a reason to keep putting up interest rates.
Russ Mould, investment director at AJ Bell, said: “The FTSE 100 rose 0.6% to 7,838, led by healthcare, financials, industrials and basic materials stocks.
“The index would only have to rise another 0.8% to beat its intraday all-time high of 7,903 achieved on 22 May 2018. Smashing through this level would give overseas investors another reason to start looking more seriously at UK stocks.
“After the Brexit vote, UK stocks were off the menu for many international investors and valuations plummeted. This remained the case for some time until some canny players realised the opportunities to be had, leading to a wave of takeovers – decent businesses picked up on the cheap.
“Last year was a big turning point whereby the UK was one of the few major markets around the world not to see a big slump. Now if the FTSE 100 breaks a new record, it’s another trophy in the cabinet for the UK and a reason to shout from the hilltops that the market is not as dull as people think.
“Among corporate news, the recent spate of Christmas trading updates from the retail sector have shown it is not all doom and gloom, and sofa seller DFS has joined the pack saying life isn’t that bad. It would suggest that big ticket items are still on the menu for many people despite the gloomy economic backdrop. Therefore, it is worth watching airline operators closely to see if the nation’s appetite for foreign holidays is still intact, despite the cost.
“It may simply be a coincidence, but International Consolidated Airlines and aviation engines group Rolls-Royce topped the FTSE 100 leader board which suggests some investors might be wondering if the stronger appetite for spending than previously expected might extend to other sectors beyond retail.”