Another day, another FTSE record high

In mid-morning trading the FTSE 100 registered a new record high as optimism returns to equity markets.

City of London landscape
Source: Bloomberg

London is pressing ahead with the cool, calm and collected rally. The FTSE 100 was late to the party when it came to posting record highs, but the gradual ascent of the British equity benchmark suggests the rally is here to stay.

Equity traders are secretly delighted that the consumer price index (CPI) dropped to zero as it edges the Bank of England closer to cutting interest rates from their already historic lows.

The pound has been hit by poor inflation figures, and now that CPI has dropped to 0.0% it appears the UK is following the eurozone down the route of deflation. Mark Carney has previously stated he would cut interest rates if necessary, and the market will be calling on Mr Carney to fulfil his promise.

Wolseley shares were shaken from last week’s seven-year high after the building materials merchant revealed a first-half update that broadly matched market expectations. The resilience of the US housing sector was responsible for the firm’s 11.1% jump in trading profits for the first six months of the year. The figures from Wolseley are nothing to get excited about but they represent a slow and steadily growing business, and today’s dip in price will attract those who are not already long.

AG Barr eked out a small increase in annual revenue and the final dividend was a touch higher than anticipated by investors, but the concerns about deflation have taken the fizz out of the drinks  company’s full-year figures. AG Barr had already been fretting about declining inflation leading to a need to cut prices to stay competitive, and these fears will act to produce downward pressure on the share price.

Across the pond we are expecting the Dow Jones to open 20 points higher, at 18,136, as US index futures trade in a tight range. The weaker dollar continues to be the main driver of markets at present, and with an interest rate hike off the cards for the time being Wall Street has the space to move onwards and upwards to fresh record highs. 

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