The FTSE 100 hit new highs on Friday after UK GDP growth beat expectations in the first quarter, confirming the UK economy is no longer in recession.
UK GDP grew 0.6% in Q1 2024, considerably more than the 0.4% expected.
Even though the lion’s share of revenue generated by FTSE 100 companies comes from overseas, the general optimism around UK assets was palpable on Friday, with the index soaring to new record highs. The pound recovered to 1.2504 against the dollar.
Today’s GDP release follows positive sounds from the Bank of England yesterday on the timing of interest rates. In a series of interviews after yesterday’s interest rate decision, the BoE governor strongly hinted June may be the month the Bank of England cuts rates for the first time since the beginning of the hiking cycle, which has taken rates to 5.25%.
The combination of better growth and the prospect of interest rate cuts fired up the equity bulls sending the FTSE 100 0.8% higher to 8,466.
“The FTSE 100 is again in the ascendancy as the market hit new all-time highs on Friday,” says AJ Bell investment director Russ Mould.
“Given its international horizons, this has little to do with the UK’s better-than-expected GDP growth and is largely being driven by strength in the resources space where higher metals prices and the promise of M&A are helping to stoke share prices.
“The next key test of the index’s new-found vim and vigour will likely come next week in the form of US inflation figures.
“Investors have broadly accepted rate cuts won’t be as deep or come as soon as would have been anticipated at the start of the year. However, any signs inflation is proving much more stubborn than predicted would still represent a shock to the system for financial markets.”
The gains were broad, with a mix of mining companies, housebuilders, retailers and UK-centric stocks leading the way higher.
St James’s Place was the top riser with a gain of 2.7% as the beleaguered wealth manager hit the highest levels since early March.
Rightmove was the biggest faller, sinking 5%, after the company released disappointing revenue figures.
“Signs Rightmove is struggling to generate as much money from each of its individual customers prompted disquiet among investors as it posted its latest trading update,” Russ Moudl said.
“Being the market leader creates a virtuous circle for Rightmove. Its site has the most listings and is therefore the one which prospective property buyers will go to when looking for their next home. This reinforces its position as a must-have product for estate agencies and housebuilders. It also gives Rightmove significant pricing power when it comes to securing subscriptions from these customers.
“However, a shift in the mix of Rightmove’s business, with strong growth in the number of lettings agents subscribing to the platform, is affecting the key average revenue per advertiser metric.”