FTSE 100 hits record high on BP boost, less-hawkish Fed signal

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UK’s blue-chip index hit a record high on Wednesday, lifted by oil major BP and an upbeat risk sentiment on Wall Street after U.S. Federal Reserve Chair Jerome Powell’s comments renewed hopes for a less-aggressive monetary policy.

The exporter-heavy FTSE 100 rose 0.8% to an all-time high of 7,923.75, surpassing its previous peak of 7,906.58 hit last week. The midcap FTSE 250 index climbed 1.2%.

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Wall Street’s main indexes rallied on Tuesday after Powell said 2023 should be a year of “significant declines in inflation” even as he acknowledged that rates may need to move higher than expected if economic strength threatens the Fed’s progress in lowering inflation.

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Investors will keep a close eye on the UK gross domestic product (GDP) data due to be published on Friday, with the preliminary reading expected to show the British economy contracted 0.3% last December, but likely avoided a technical recession in the fourth quarter.

Meanwhile, the National Institute for Economic and Social Research (NIESR) cut its forecast for UK GDP growth this year to 0.2% from 0.7%, saying Britain will dodge recession in 2023 but its people will face the after-effects of a severe fall in living standards.

“Now that we seem be on this idea that recession is further away, I’d feel a bit more comfortable about the FTSE 100, and it’s still cheap on a relative basis,” said Chris Beauchamp, a chief market analyst at IG.

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“But given so much of it is oil prices and you’ve obviously got questions over when the central banks will start to cut rates, which will hit banks that are a huge weight in the FTSE 100,” Beauchamp said, referring to the commodity-heavy index.

Shares of BP rose 3.2% to touch a fresh three-year high, a day after the British energy giant reported record profit for 2022.

Barratt Developments Plc gained 1.6% even as Britain’s largest housebuilder cut its half-yearly dividend.

Smurfit Kappa fell 2.6% to the bottom of FTSE 100 after the packaging giant said box volumes were down less than 2% in 2022 against a strong prior year, and that Germany and the UK markets performed below expectations.

Peers DS Smith and Mondi fell more than 2% each. (Reporting by Sruthi Shankar in Bengaluru; Editing by Savio D’Souza and Sherry Jacob-Phillips)