FTSE 100 share index hits new record highs
- Credit: PA
London’s FTSE 100 share index today reached a new all-time high after investor confidence was boosted by an agreement to extend Greece’s bail-out terms.
The breakthrough came after European creditors approved the list of reform measures being proposed by Athens as a requirement of the country’s four-month extension to its debt arrangements.
A rise in the price of Brent crude oil to about 60 US dollars was another factor in pushing the FTSE 100 above the 6,950 intra-day record set during the dot.com boom at the end of 1999.
The London market has trailed behind Wall Street in reaching a new record high, despite being in sight of the threshold for much of the last year.
Global markets were also lifted by comments from Federal Reserve chair Janet Yellen after she told US politicians that the country’s economy is making steady progress.
But she added that the Fed will not be rushed into raising interest rates as unemployment is still too high and wage growth remains sluggish.
Mining stocks were the driving force behind London’s record-breaking session, with mining giant BHP Billiton up 7% after better-than-expected results.
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The FTSE 100 Index finished the landmark session 37.5 points higher at 6949.6, above its previous record close of 6930 on December 30 1999. The index peaked during today’s session at 6958.9.
Samuel Tombs, senior UK economist at Capital Economics, believes the FTSE 100 will continue its gradual ascent and reach 7500 by the end of next year.
He said: “The FTSE 100’s close above its previous all-time high will no doubt be heralded as another milestone in the UK’s economic recovery.
“But the reality is that the index has underperformed many other overseas indices for some time and is no longer a meaningful barometer of the UK economy’s health.”
He said the UK top flight has performed considerably worse than overseas indices over the last two years at a time when the UK economy has outperformed.
Around three-quarters of the revenues of FTSE 100 companies are now generated overseas, making their profits sensitive to movements in sterling.
Mr Tombs added: “By raising interest rate expectations and hence pushing up sterling, economic strength has had the perverse effect of weighing on the FTSE 100.”
Richard Hunter, head of equities at Hargreaves Lansdown, warned against a comparison between today and 1999 as it does not include dividend yields and the fact that the FTSE 100 is reshuffled on a quarterly basis. But he added: “It is pleasing to see the psychological barrier removed at last.”
He continued: “In itself, the number matters little; the make-up of the FTSE 100 today is vastly different to the index of 1999, whereby the likes of miners, oils and banks have replaced the then-dominant TMT (telecoms, media and technology) sector as typical constituents.”
“In addition, the number itself does not take account of reinvested dividends in the interim period, which would actually show a return to date well in excess of 60%. Finally, on a valuations basis, the index is currently pretty much in line with historical averages at around 16, as opposed to the frothy multiples of 27 in 1999.
“Even so, the fact that the FTSE 100 is now some 6% ahead in the year to date is a sign of ongoing optimism from investors, despite the wider challenges being faced.”