FTSE 100 hits all time high but valuations still lag peers

The FTSE 100 hit a new all-time high as it rose above 8,100 to exceeded the previous high set in February 2023. The growth of US and Japanese equities has attracted a lot of attention, but UK equities have been making steady gains this year. The recent rise in the UK’s large cap index is partly due to strong gains from energy and mining stocks but the decline in the value of the pound has played a part. There has also been some buying by overseas investors concerned about the high valuations of some US stocks and have been tempted by the lower valuations in the UK.

The decline in sterling has a significant impact on FTSE 100 earnings due to the high proportion of multinational companies, particularly energy and mining stocks, which generate significant earnings in US dollars. Stocks in the FTSE 250 are less affected by currency movements. Since early March, sterling has fallen from $1.28 to $1.23 this week. During this time the FTSE 100 has risen 5.6% compared to a gain of 2.5% for the FTSE 250.

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(*Please note, The contents of this e-shot been prepared for general information only. It does not contain all of the information which an investor may require in order to make an investment decision. If you are unsure whether this is a suitable investment you should speak to your financial adviser. This information is not guaranteed to be correct, complete, or accurate. FE Research is a division of Financial Express Investments Ltd, registration number 03110696, which is authorised and regulated by the Financial Conduct Authority (FRN 209967). For our full disclaimer please visit www.financialexpress.net/uk/disclaimer. Data Sourced from FE Analytics, and Bloomberg Finance LP.)

Falling UK inflation opens the way for rate cuts before USA

UK CPI inflation slowed to 3.2% in March due to falling food prices and lower energy costs. This is down from 3.4% in February. Core inflation (excluding volatile food and energy prices) also fell, but inflation within the services sector remains high. The reduction in the price cap for domestic energy bills is expected to help inflation return to target in the short term, however, the Bank of England remains concerned about the potential for inflation to pick up again later this year, partly due to rising wages.

Wages continue to rise faster than inflation, as average wages excluding bonuses are up 6% compared to last year. Job vacancies remain higher than usual, but the unemployment rate and the number of economically inactive people increased. Meanwhile, the UK’s listed recruitment companies have reported a drop in revenues and profits as companies become more cautious about hiring new staff. The weaker outlook allowed Bank of England governor Andrew Bailey to raise the prospect of the UK cutting rates before the US.

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• USA: Strength if the USA economy causes markets to review expectations for rate cute
• Equities: Volatile markets help boost Wall Street bank profits
• USA: Consumer spending forces markets to reconsider rate cuts

(*Please note, The contents of this e-shot been prepared for general information only. It does not contain all of the information which an investor may require in order to make an investment decision. If you are unsure whether this is a suitable investment you should speak to your financial adviser. This information is not guaranteed to be correct, complete, or accurate. FE Research is a division of Financial Express Investments Ltd, registration number 03110696, which is authorised and regulated by the Financial Conduct Authority (FRN 209967). For our full disclaimer please visit www.financialexpress.net/uk/disclaimer. Data Sourced from FE Analytics, and Bloomberg Finance LP.)

Middle East tension and rising demand push up oil price

The price of crude oil has increased around 10% in recent weeks as fears that conflict in the Middle East may broaden and begin to affect supply. In 2023 oil peaked around $92 a barrel for Brent crude. It has been trading around $80 for the last six months but appreciated to $90 earlier this month. Israel’s ongoing invasion of Gaza is raising tension in the region and if Iran gets directly involved this could significantly disrupt oil supplies. In addition, signs that Chinese industrial production is increasing means greater demand when oil supply is being kept tight by the OPEC countries.

Separately, Shell has raised the possibility of moving its stock market listing to the US as it views the higher valuations of its US-based rivals. The current CEO and his immediate predecessor both said this week that a move to the US may be in the best interest of the company as it would make financing cheaper, increase the share price and it would face what the company sees as a more positive attitude from investors.

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• USA: Government bond markets rattles by another strong inflation reading in the USA
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• Equities: Lower inflation expected to boost retailer’s profits

(*Please note, The contents of this e-shot been prepared for general information only. It does not contain all of the information which an investor may require in order to make an investment decision. If you are unsure whether this is a suitable investment you should speak to your financial adviser. This information is not guaranteed to be correct, complete, or accurate. FE Research is a division of Financial Express Investments Ltd, registration number 03110696, which is authorised and regulated by the Financial Conduct Authority (FRN 209967). For our full disclaimer please visit www.financialexpress.net/uk/disclaimer. Data Sourced from FE Analytics, and Bloomberg Finance LP.)

UK Mortgage Market perking up

The mortgage market delivered more good news as approvals rose more than expected in February, hitting a 17-month high. This follows the trend in the housing market were mortgage rates have declined from the summer highs of last year. According to the Bank of England, UK mortgage approvals reached their highest levels since September 2022. UK shop price inflation also fell below 2% in March. This is the first time it has hit that threshold since December 2021. According to the British Retail Consortium, shop price inflation eased to 1.3% in March versus 2.5% in February.

This will be welcome news to policymakers as they consider rate cuts later this year. It will also be a relief to households and businesses that have tried to keep up with the cost of living crisis. For context, food inflation was 15% a year ago. The OBR has forecast that inflation will fall below 2% over the coming months so gilts could rally even further still.

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• USA: Central Banks consider timing of rate cuts with release of new data
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(*Please note, The contents of this e-shot been prepared for general information only. It does not contain all of the information which an investor may require in order to make an investment decision. If you are unsure whether this is a suitable investment you should speak to your financial adviser. This information is not guaranteed to be correct, complete, or accurate. FE Research is a division of Financial Express Investments Ltd, registration number 03110696, which is authorised and regulated by the Financial Conduct Authority (FRN 209967). For our full disclaimer please visit www.financialexpress.net/uk/disclaimer. Data Sourced from FE Analytics, and Bloomberg Finance LP.)