The FTSE 100 index reached an unprecedented closing level on Friday, buoyed by rising oil prices and defying a downward trend seen on Wall Street. The index closed at 10,910.55, up 63.85 points or 0.6%, marking a significant milestone in a week that showcased strong investor confidence in UK equities.
Market Performance Highlights
In a week characterised by volatility, the FTSE 100 outperformed both European and American markets, closing the week with a 1.1% gain. Investment director at AJ Bell, Russ Mould, stated, “Two months in, it looks like 2026 could be a second bumper year in a row for investors putting their faith in UK stocks if current performance trends continue.”
The FTSE 250 index also saw gains, rising by 38.15 points or 0.2% to finish at 23,757.15, while the AIM All-Share index closed up 4.30 points or 0.5% at 819.53. Year-to-date, the FTSE 100 has increased by an impressive 9.6%.
Wall Street, in contrast, faced pressure from stronger-than-expected wholesale inflation data, leading to losses across major indices. The Dow Jones Industrial Average fell by 1.0%, the S&P 500 decreased by 0.6%, and the Nasdaq Composite dropped 0.9%.
Inflation Data Influences Investor Sentiment
The US Bureau of Labour Statistics reported that the Producer Price Index (PPI) rose 0.5% month-on-month in January, matching December’s growth rate. The annual growth rate, however, eased slightly to 2.9% from 3.0%. Notably, core PPI, which excludes food and energy, increased by 0.8% month-on-month, surprising analysts who had projected a lower figure.
These inflation figures have significant implications for monetary policy, as Barclays estimates that core Personal Consumption Expenditures (PCE) inflation rose 0.4% month-on-month and 3.1% year-on-year.
Geopolitical Tensions Drive Oil Prices Higher
Oil prices surged as tensions escalated between the US and Iran, following comments from Iranian officials who insisted the US must abandon its “excessive demands” for negotiations to progress. Amidst warnings from President Donald Trump regarding potential military action, oil prices climbed, with Brent crude trading at $72.71 per barrel.
The geopolitical backdrop is pressuring airlines, evidenced by a notable decline in British Airways’ parent company IAG, which fell 7.4% despite reporting strong annual results. Budget airline easyJet also saw a dip of 2.6%.
Increased Demand for Safe Havens
The rising uncertainty in the Middle East has driven investors towards safer assets, pushing gold prices higher to $5,235.52 an ounce. This uptick benefitted mining companies such as Fresnillo, which rose 3.4%, and Endeavour Mining, up 2.3%.
Noteworthy Stock Movements
On the FTSE 100, London Stock Exchange Group led the charge with a 4.2% increase following positive earnings, while Rightmove advanced 4.3% after announcing a robust dividend alongside a buyback programme. Conversely, Melrose Industries suffered a staggering 12% decline following its earnings report, prompting analysts to label the sell-off an overreaction.
The FTSE 250 saw Senior soar by 20% after revealing it had received two cash bids, while Hays faced a tumultuous day with a 9.6% drop amid leadership changes and declining earnings.
Currency and Bond Market Reactions
In foreign exchange markets, the pound slipped to $1.3458, while the euro gained ground to $1.1818. The yield on the US 10-year Treasury saw a slight narrowing to 3.98% from 4.03%, reflecting shifting investor sentiment in response to the economic landscape.
Why it Matters
The FTSE 100’s record close reflects a broader trend of investor optimism in UK equities, despite external pressures from inflation and geopolitical tensions. The resilience of the index highlights the potential for continued growth in the face of uncertainty, suggesting that UK markets may offer attractive opportunities for investors. As global events unfold, the interplay between energy prices and economic indicators will remain crucial in shaping market dynamics moving forward.
