Equities boosted by low interest rate
Footsie heading towards 7,000 as investors turn to shares
The FTSE 100 last night closed just 86 points shy of the 7,000 level and is expected to rise again today after all three key US indices ended the session on new highs.
Shares have been boosted by low interest rates and average dividend payments of 3.5% by blue chip firms. They are also bolstered by the weakness of sterling and a surge in the oil price.
Footsie companies enjoyed a positive session, the index closing 48 points higher on Thursday at 6,914, the highest level since May last year.
In the US, the S&P 500, Dow and tech heavy Nasdaq all reached fresh highs yesterday, the Dow up 117 points at 18,613, the S&P500 closing 0.47% higher at 2,185 and the Nasdaq adding 0.,46% to 5,228.
Oil made good gains, up by as much as 5% and hitting an intraday high of $46.30 following comments from Saudi’s oil minister who said he is prepared to discuss the market situation at next month’s Opec meeting in Algeria.
European bourses also enjoyed gains. Frankfurt’s DAX and the CAC in Paris advanced 0.9% and 1.2%, respectively. In Asia the Shanghai index and Japan’s Nikkei were higher.
The Bank of England’s decision to cut interest rates for the first time since March 2009 and sanction a £70 billion bond-buying programme added £27 billion to the value of Britain’s blue chips.
The index is now close to breaking through the 7,000 barrier which it last breached in April last year. Its all-time intra-day high is 7,122.74, which it reached on 27 April, and its highest close is 7,103.98 on the same day.
The rise in stock markets was unexpected in the days following the EU referendum on 23 June. Chris Beauchamp, a senior market analyst at the spread betting group IG, said: “Of all the post-Brexit outcomes discussed across the City over the past few months, ‘buying frenzy’ was not one that was viewed as very likely.”
There is a growing belief among investors that Article 50, the mechanism for Britain to leave the EU, will not be triggered for several months.