- FTSE 100 has a surge of power amid an easing of geopolitical tensions.
- Interest rate cuts spied on the horizon are helping discretionary stocks.
- Ongoing conflicts keep defence stocks higher.
- Blue chip index close to intraday high of 8,047 and has been trading above its record closing value of 8,014.
Susannah Streeter, head of money and markets, Hargreaves Lansdown:
“London’s blue-chip index has had a surge of power as heightened geopolitical tensions have eased, and investors assessed the brighter prospects for the UK economy, with interest rate cuts spied on the horizon. It’s tantalisingly close to breaching the all-time intraday high of 8,047 and it’s been trading above its record closing value of 8,014.
Gold, a safe haven asset, has slipped back slightly in the absence of fresh attacks by Iran or Israel. However, the precious metal is still hovering close to record highs. Brent Crude has also fallen back slightly as the focus turns to the prospects of weakening demand in the US if high interest rates linger for longer. However, it’s not had much effect on the share prices of the big energy giants. Tensions are still simmering in the Middle East and there are ongoing concerns about the potential that they could flare up again, causing fresh disruption to supplies.
With growth in the UK not shooting the lights out, and inflationary pressures showing signs of easing, there is still optimism around about the prospect of interest rate cuts coming later in the summer, which appears to have help the FTSE 100 climb higher. As lower borrowing costs are forecast later this year, amid a more slightly more positive outlook for the economy, housebuilders have also headed sharply higher amid hopes that stronger demand will return for new homes. Ocado, J Sainsbury, Next, Marks and Spencer and Tesco have also been lifted amid hopes for more clement conditions for consumers.
A handful of FTSE 100 listed companies, which breached record levels earlier in the month, are on course to climb back up to those highs, such as Rolls Royce and BAE Systems. Aerospace stocks have been pushed higher by ongoing conflicts and post-pandemic demand. Fears of a Russian victory over Ukraine have dissipated with the long-awaited passing of the $60.8 billion funding deal by the US House of Representatives. Chunks of funding are expected to be used imminently to bolster Ukraine’s air defences and replenish dwindling shell reserves to repel attacks in the East. The legislation also contains $26 billion for Israel and $8.12 billion for the Indo-Pacific, including Taiwan. With governments bolstering their defence capabilities, military contractors are eyeing up the potential for lucrative contracts ahead. The expectation that that military budgets will keep expanding has been reinforced by defence chiefs in Nordic countries and the UK calling for better military preparedness over the next decade.”
