The FTSE 100 was closing in on a record closing high on Friday as the index smashed through 8,000 and continued past the record closing price in early trade.

The index did ease off as the session progressed and fell back below record levels.

“With the FTSE 100 breaking past the 8,000 level – and at 8,039 points at the time of writing – the blue-chip index is honing-in on a record high if it can hang on to those gains by the end of the day,” said Jason Hollands, Managing Director of Bestinvest

“Some positive headlines for the UK equity market will certainly be welcome news given it has been somewhat unloved in recent times and endured a raft of negative stories about investor outflows and companies switching their listings overseas.”

The FTSE 100 rose on Friday as traders digested the news that the UK economy grew 0.1% in February and looked set to exit recession. As FTSE 100 companies largely earn there revenues overseas, the move was a matter of improved sentiment rather than a more upbeat outlook for earnings.

“Gross domestic product rose 0.1% between January and February, which was in-line with expectations and thanks to growth in manufacturing, especially in utilities. These figures mean the UK economy is likely to have expanded in the first quarter overall, marking an end to recession,” said Sophie Lund-Yates, lead equity analyst, Hargreaves Lansdown.

“With that said, the levels of growth being displayed aren’t very inspiring, particularly for our large services industry. Falls in construction activity also indicate a broader malaise the UK is yet to shake off.”

Mining companies were among the top gainers as the inflation trade continued to support commodity stocks.

Oil majors Shell and BP enjoyed higher oil prices with BP among the best performers.

However, higher oil prices does no favours for airline profitability and easyJet and IAG sank as a result. EasyJet was down around 5% at the time of writing.

New data released by AJ Bell reveals the investment platform’s ISA investors shunned individual UK stocks and UK-focused funds and trusts during the busy ISA period starting 1st January 2024 and running to 5th April 2024.

Breaking down investor activity in funds and individual stocks, AJ Bell found ISA investors had a preference for global equity funds and US stocks enjoyed the biggest inflows.

The popularity of overseas funds is unsurprisingly given the strength of overseas indices in early 2024, but Laith Khalaf, head of investment analysis at AJ Bell, warned Jeremy Hunt’s new British ISA could face difficulties if current trends persist.

“Judging by the most popular investments with ISA investors so far in 2024, it looks like Jeremy Hunt is going to have to rely on individual stock investors to do the heavy lifting when it comes to the UK ISA. Fund and trust investors are still very much going global with their ISA money in search of superior returns,” said Laith Khalaf, head of investment analysis at AJ Bell.

“None of the twenty most popular funds and trusts chosen by ISA investors so far in 2024 appear to be eligible for the UK ISA, based on the rules currently proposed by the Treasury.”

Khalaf noted a grey area around Investment Trusts and the British ISA, which one would hope is clarified given the discounts some Investment Trusts trade at currently.

“There is however some confusion over whether investment trusts will be included, even those that invest overseas, on the basis they are themselves listed UK companies,” Khalaf said.

“Likewise, presumably the government would look favourably on allowing Greencoat UK Wind into the UK ISA, seeing as the trust invests in a portfolio of UK wind farms. As things stand though, the Treasury proposals for eligible investments only cover UK shares and bonds, and the funds and trusts that hold them.”

Most popular funds and trusts with ISA investors

Source: AJ Bell, net flows from DIY investors in ISAs from 1 January 2024 to 5 April 2024 excluding AJ Bell funds.

Compounding the problem for the British ISA, individual stock investors also choose to look beyond London’s markets for a large proportion of their cash during the ISA season.

“Stocks that provide exposure to the US market and offer ways to play the artificial intelligence theme have been among the most popular choices for AJ Bell customers investing in an ISA between the start of January and the end of the tax year on 5 April. With some of the best gains in recent years having come from US shares, it’s no wonder investors have fished for opportunities across the pond,” said Dan Coatsworth, investment analyst at AJ Bell.

“Four out of the top 10 most popular stocks for AJ Bell ISA transactions by net flows are listed in the US. At the top is chips giant Nvidia which has delivered stellar share price gains since early 2023.”

While AJ Bell’s data is bad news for the British ISA, it does demonstrate UK investors’ prudent approach to investment by making savvy picks in some of the world’s best-performing shares.

“Successful investing is often about looking for opportunities away from the mainstream and one multi-billion-dollar stock has attracted quite a bit of interest from AJ Bell customers despite being relatively unknown in the UK,” said Dan Coatsworth, investment analyst at AJ Bell.

“Samsara has been a hit with people investing in their ISA this year, perhaps because it offers a different way to play the AI theme rather than going down the obvious route of Nvidia or one of the big tech providers. Samsara runs a platform that brings together important operational data for businesses and governments, and it uses video technology that incorporates artificial intelligence.

“In third place on the ISA list is Microsoft, seen as a trusted way to play the tech space. Millions of people use its programmes on their computers, laptops and phones, while it is also a major player in the gaming space.”

The FTSE 100 slipped on Thursday as several large dividend payers traded ex-dividend and investors sold equities in the face of an uncertain wait for interest rate cuts that may be few and far between when they eventually come.

Interest rates are a hot topic for the market currently, and unfortunately, for equity bulls, the outlook has become a lot worse in the past 24 hours.

The FTSE 100 failed to stage a recovery from yesterday’s selloff as concerns about a lack of interest rate cuts this year sapped enthusiasm for stocks. US CPI came in hotter than expected yesterday and the ECB kept rates on hold today saying they would keep rates at the current level until inflation falls – which could mean a long wait.

That said, the ECB is likely to be the first major central bank to cut rates, possibly in June, as the European economy weakens.

“With the European economy weak and inflation falling, interest rate cuts are justified and needed. The same is not necessarily true of the US, where economic growth ‘exceptionalism’ is keeping its inflation uncomfortably high, calling into question whether the Fed can cut rates at all this year,” said Ben Laidler, Global Market Strategist at investment platform eToro.

We kept our interest rates unchanged at our latest meeting.

See our monetary policy decisions https://t.co/nLLQk6w1bL pic.twitter.com/rZ8Wex669f

— European Central Bank (@ecb) April 11, 2024

Higher oil prices added to inflation concerns after the US reported Iran was considering retaliatory measures against Israel, risking a serious escalation in Middle East tensions.

“After yesterday’s US inflation figures knocked the market for six, it’s no wonder that equities struggled for direction on Thursday,” said Russ Mould, investment director at AJ Bell.

“Hotter than expected inflation data has given the Federal Reserve yet another reason to sit on its hands and kick the prospect of a rate cut further down the road. The signs have been clear to see for a while and investors are now having to readjust their expectations for when we will finally see the much desired ‘pivot’ in monetary policy.”

The FTSE 100 was down 0.38% at session lows shortly after the ECB announced their rate decision on Thursday.

Ex-dividends

Aviva, Phoenix Group, and Lloyds all traded ex-dividend on Thursday and were among the top fallers. Aviva was the top faller, down 6.1%, after losing the rights to a chunky 22.3p dividend due to be paid 30th May. Phoenix Group was down 6%.

Easyjet was a big faller as oil prices spiked higher and travel stocks generally fell.

AstraZeneca was among the top risers after hiking its dividend 7% as shareholders voted on leadership remuneration.

“The main UK corporate news story today comes from pharmaceutical giant AstraZeneca, who have hiked their dividend by 7% on the same day as a key vote on leadership remuneration,” said Sophie Lund-Yates, lead equity analyst, Hargreaves Lansdown.

“Shareholders won’t be blind to the fact that this is a barely disguised sweetener, but it may quell appetites enough to get the divisive package through. The bigger picture for Astra still centres on the work it does on rarer and more complex treatments – dominating this area of the market takes very deep pockets, and that doesn’t appear to be under threat.

ASOS is set to confirm a sharp down in sales next week with the release of interim results for the 26-week period to 3rd March.

The company has already said sales will decline by 18%, so it will be no surprise when they report on 17th April.

It will be vital to see how they have managed the decline in sales. The company is under pressure to improve stock efficiency, and investors will be closely watching how much of the planned £600m targeted inventory reduction they have completed.

Achieving positive EBITDA for the full year is a big goal for ASOS. Any evidence suggesting they are on track to do this will be well received.

“ASOS has had a tough start to the year. Business transformation plans remain on track, but improving stock efficiency and reducing inventory levels comes at a cost,” said Guy Lawson-Johns, equity analyst, Hargreaves Lansdown.

“Full-year guidance remains unchanged, which includes 5-15% sales declines and positive cash generation. Investors will be looking for signs that better times are coming and that a return to growth in the final quarter of this year is still on the cards. 

“Active customer numbers will also be in the spotlight. It’s no secret M&S and Next have been growing sales in the third-party brands ASOS is known for, and newer entrants like Temu continue to be a threat. Ultimately, markets are looking for signs that the increased marketing spend and stock rationalisation are being well received by its target audience of fashion-loving 20-somethings.” 

ASOS shares are down 55% over the past year and will likely react positively to any improvements to previous guidance.