FTSE 100 Reaches Record Peak, Market Eyeing BoE’s Rate Decision 

The FTSE 100 had a strong performance on the trading day after the Early May Bank Holiday. It reached an intraday record peak of 8,335.68, representing a 1.49% climb. By the end of the session, the index closed at 8,313.67, marking a 1.22% gain for the day. The rise mirrored the previous two sessions’ increases seen across European equities, as the market enjoyed the anticipated interest rate reductions by leading global banks. 

The prominent industrial mining sector emerged as one of the highest climbers, recovering from the previous week’s subpar performance. Fresnillo experienced a 3.3% jump, while Rio Tinto and Glencore experienced gains ranging from 3% to 2%, buoyed by China’s commitment to economic stimulus and interest rate cuts during its Labor holiday, which boosted morale for base and precious metals. 

Property developers sensitive to rate shifts also exhibited strong performance; companies like Persimmon, Barrat, and British Land saw their shares go up from 2.8% to 3.5%, benefitting from the significant drop in Gilt yields that bode well for the mortgage demand forecast. 

On the downside, BP’s shares fell by 1.3% following the revelation of lower-than-expected profits for the first quarter. Nevertheless, the continuation of its stock repurchase scheme helped mitigate a steeper drop during the trading day. 

(FTSE 100 Index Yearly Chart) 

The British pound traded around the $1.25 level, as investors closely watched the anticipated timing of interest rate cuts. While the Bank of England is expected to maintain rates unchanged during its upcoming May meeting, market participants are fully pricing in the first rate reduction in August instead of September. In April, BoE Governor Andrew Bailey expressed optimism, noting that British inflation appeared on track to meet the 2% target. UK inflation fell to 3.2% in March 2024, the lowest rate since September 2021, down from 3.4% in the previous month. The headline inflation had reached its peak of 11.2% in October 2022. 

(GBPUSD Monthly Chart) 

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