FTSE 100 closes above 7,500 for first time as UK inflation jumps to 2.7% – as it happened
Rising air fares, clothing and food costs have driven the cost of living up at its fastet rate in nearly four years, faster than earnings
- FTSE 100 smashes through 7,500
- UK inflation soars to highest rate since September 2013
- PwC: Inflation is heading over 3%
- Real wages are falling
- TUC: Politicians needs answers
- Charts: Why inflation is jumping
- FTSE 100 hit a new alltime peak this morning
6.04pm BST
In a volatile day's trading, the UK stock market has outpaced its peers, with the FTSE 100 closing above 7,500 for the first time. Investors have been buoyed by hopes of further infrastructure spending in China, which has boosted commodity company shares, a strengthening oil price on the back of suggestions an output cut would be extended and a dip in the pound against the euro after higher than expected inflation figures. But after hitting new highs earlier in the week, Germany's Dax has dipped back, with a mixed performance from other European markets. The final scores showed:
5.48pm BST
And here's our updated Lloyds Banking Group story with the latest developments:
Related: Lloyds no longer owned by taxpayer as ministers sell final shares
5.25pm BST
The UK government has reportedly sold off the final part of its stake in Lloyds Banking Group, the legacy of the bank's bailout following the financial crisis.
Here's our story from the weekend:
Related: Final taxpayer shares in Lloyds Banking Group to be sold off
5.20pm BST
On the FTSE 100 reaching 7,500, Laith Khalaf, senior analyst at Hargreaves Lansdown, said:
An improving global economy, a weaker pound and higher commodity prices are behind the surge in share prices. It's quite amazing to think the footsie has gained 2000 points in the last fifteen months against a background of weak investor confidence.
In the short term the market can of course move in either direction but investors will be thinking that the 8,000 mark is hovering into view.
4.35pm BST
After hitting yet new highs earlier, the S&P 500 has edged lower although the Nasdaq Composite is managing to just about keep in positive territory. The Dow Jones Industrial Average, which is around 200 points shy of its peak, has also slipped back. Chris Beauchamp, chief market analyst at IG, said:
While the FTSE 100 has continued to clock up record highs this afternoon, the same cannot be said of the S&P 500 and Dow Jones. Both indices seem stuck in limbo, unable to move higher. Perhaps some of this is down to nervousness following the latest Trump news, as the president takes to Twitter to defend something that his aides last night said he didn't do (are we all keeping up?).
But aside from that, US markets are bereft of reasons to move. Still, the old adage 'never short a quiet market' applies here; while Wall Street isn't going up, it isn't going down yet either, and if the past few months have taught us nothing else it is that a grind higher is more likely than a big correction.
3.56pm BST
It took17 years for the FTSE 100 to go from 6000 to 7000 - from April 1998 to March 2015 - although it came close on the last day of 1999 before the dotcom bubble burst.
But it has taken just over two years for the leading index to climb from 7000 to 7500, showing how the pace has accelerated in recent times with the 8000 barrier now in the sights of investors. Jasper Lawler, senior market analyst at London Capital Group, said:
The UK stock market reached a new milestone today when the FTSE 100 hit 7500 for the first time. Investors seem to be feeling confident about the outlook for Britain under what is expected to be the biggest Conservative party majority since Margaret Thatcher...
Data from the ONS showed price inflation in the UK at its strongest since 2013. Rising inflation tends to make stocks relatively more attractive to bonds, which could make the next big hurdle for the FTSE of 8000 more achievable.
3.27pm BST
The pound may be holding up against a weak dollar but it has fallen back against the euro following the morning's inflation figure, currently down 0.86% at a1.1647. Connor Campbell, financial analyst at Spreadex, said that was one reason for the FTSE 100's current surge:
The FTSE left its international peers in the dust this Tuesday, the UK index rocketing more than 1% higher to hit a record peak of 7530. The continued recovery of its key commodity stocks - the likes of BP, Rio Tinto and Anglo American all rose between 1.5% and 3% - was joined by the pleasing sight of a sterling slide, the currency dropping 0.8% against a souped-up euro.
In months previous the kind of inflation figure produced this morning - the CPI reading hitting its highest level since autumn 2013 - would have caused a bit of a headache for the UK index. However, the Bank of England appears reluctant to combat rising prices with a rate hike; combine that with the alarming squeeze on real wages and the pound has little reason for cheer, something that only works in the FTSE's favour.
3.15pm BST
Back with the higher than expected UK inflation figures, and economists at Barclays believe this will not necessarily put any more pressure on the Bank of England to raise interest rates:
Barclays on UK inflation: Strengthens our view that the BoE will keep its monetary policy stance unch. over our forecast horizon (1/2)
... As CPI printed exactly in line with staff forecast in QIR. Hence it is unlikely to be ammunition for further dissent in June (2/2)
3.07pm BST
And here's the US stocks at new peaks:
Obligatory all-time high list
Amazon
Expedia
HomeDepot
Marriott
McDonalds
Pepsi
Deere
Adobe
Activision
Salesforce
Alphabet
NVIDIA
Visa
Aon
2.53pm BST
With global markets hitting new peaks, here's our story looking at five reasons for the rise:
Related: Global stock markets: what's driving the record rises - and will they continue?
2.45pm BST
World stocks at new highs, %age of fund managers saying stocks overvalued is highest since tech bubble.
But "it ain't irrational yet" -BAML pic.twitter.com/QFicLeFlsE
2.34pm BST
DING DING goes the opening bell on Wall Street, opening a new trading day in New York.
And shares are rallying, sending the S&P 500 and the technology-focused Nasdaq to fresh record highs.
2.31pm BST
In better news, US factory output jumped by 1% in April - the fastest rate in three years.
1.54pm BST
Ouch! The US dollar has just hit a new six-month low, after new disappointing economic data from America.
The number of new house-building projects (or housing starts) fell by 2.6% in April, the Commerce Department reports, following a 6.6% slide in March.
1.45pm BST
Kathleen Brooks, research director at City Index, suggests that the Footsie could now make a run at 8,000 points.
She says:
Considering it took five months for the FTSE 100 to jump 500 points, if momentum is maintained over the summer months then we could see 8,000 in this index by October.
Looking at politics first, the markets reacted with glee to the election of Donald Trump last November, European indices are now doing the same with Emmanuel Macron in France. His victory in last week's election solidifies the euro and eradicates the threat to the West's organisational structure from nationalist parties who wanted to break up the Eurozone. This is a powerful tonic for markets, especially when Europe's economy is starting to pick up and the ECB is toying with the idea of tapering at some stage later this year. Markets may continue to bask in Macron's victory, but it could be cut short in mid-June when we get the National Assembly elections. If Macron's newly formed En Marche! Party cannot get enough members into parliament to push through Macron's radical agenda, then the Macron rally could lose some of its lustre. However, the next month could be strong for European equities, as political risk recedes.
Central banks are also driving the markets, with the Fed expected to raise interest rates next month, and the ECB continuing with its enormous stimulus package. The soft patch of economic data for the US in Q1 this year means that the Fed could put the brakes on its rate hiking efforts for a few months after the expected June hike. A little bit of tightening isn't going to hurt this stock market rally, but too much of it will, thus, a hike from the Fed in June and then a pause would probably be the best outcome for global stock markets. In contrast, a strengthening European economy is giving rise to expectations that the ECB will have to announce some form of taper perhaps as early as this summer. But that is good for stocks also, as it would suggest a confidence in the Eurozone economy that would also be welcomed by investors. Thus, this rally may still have further to go.
1.12pm BST
Although UK inflation is rising sharply, UK house prices are cooling as the London property boom falters.
The average British house price rose by 4.1% in the 12 months to March, the weakest growth since October 2013.
Higher inflation is contributing to buyers' nervousness about prospects for the property market and making them more determined to achieve the best possible deals. There are concerns about affordability and possibly jobs being compromised mainly because changes in exchange rates are pushing prices up and making goods more expensive. It underlines once again the importance of realism from buyers and vendors, particularly the latter, if they want to transact.
'The house-price figures are a little concerning bearing in mind 12 months ago how active the market was as buyers struggled to beat the stamp duty surcharge deadline. But they are not really surprising when you appreciate how the market has changed in that time and a new sense of balance between supply and demand is prevailing which has contributed to where we are now - a more subdued market with fewer transactions, softening prices and more realistic buyers and sellers.'
12.33pm BST
This chart from Danske Bank shows neatly how inflation (the blue line) is now rising faster than earnings (the red line):
#UK: Higher inflation & subdued nominal wage growth => pay squeeze! Slower private consumption growth going forward #GE2017 #Brexit pic.twitter.com/VXCNBW67q7
Inflation rises to 2.7% from 2.3% last month. Earnings - excluding bonuses - 2.2% #squeeze
11.57am BST
Campbell Robb, chief executive of the Joseph Rowntree Foundation (which campaigns against poverty) explains how poorest households are suffering from rising prices:
"Today's figures show the cost of living is creeping ever higher for families, including the cost of essentials such as food, clothing and electricity bills, at a time when wages are stagnant and working-age benefits are frozen.
"Tomorrow's earnings figures are expected to show that pay fell at the start of 2017, while inflation is set to continue increasing over the year. We know people in the poorest households spend roughly 1 in every 6 on food and 1 in 13 on energy bills, meaning they feel the squeeze more when costs go up.
11.36am BST
Boom! The FTSE 100 index of the biggest companies listed in London has just hit another record high.
The FTSE has rattled through the 7,500 point mark for the first time ever, up almost 50 points today.
Vodafone are in demand this morning despite reregistering a a6.1bn annual loss. The telecoms company wrote-off a large loss in its Indian operation but traders focused on the increased dividend and rosy outlook for next year.
11.26am BST
After an early spike, the pound has fallen back to $1.288 as the City digests today's inflation figures.
Traders may be concluding that the Bank of England is likely to 'look through' (ie, ignore) rising inflation, on the grounds that raising rates now would cause more harm than good.
"Although one member of the Bank of England's monetary policy (MPC), Kristin Forbes, voted for a hike in interest rates in the last meeting, the minutes made it clear that other members will only join Ms Forbes in voting for a rise, if inflation starts surprising on the upside. So far, this has not happened.
"There is nothing in today's data to suggest that the MPC will deviate from its current course. The odds of an increase in UK interest rates later this year are diminishing."
11.13am BST
Fund manager Paul Mumford of Cavendish Asset Management fears that rising oil prices will drive inflation up this year - as Opec producers are poised to extend their current production cuts.
He argues that small investors should be looking to buy shares, rather than invest in bonds:
"The news that UK inflation rose to 2.7 per cent in April - tracking well above the Bank of England's two per cent target for the next few years - undermines the appeal of gilts and bonds. With yields below the rate of inflation, capital is effectively being eroded.
These are ideal conditions for a potential return of the cult of equity, which although riskier, looks favourable in current market conditions. The rate of inflation could be forced even higher by the price of oil, as this may nudge upwards due to OPEC action this month - resulting in an even more compelling argument for equities."
10.30am BST
Andrew Sentance, senior economic adviser at PwC, warn that inflation is likely to keep climbing this year, hitting the UK public in the pocket.
"Inflation has risen to its highest level since the autumn of 2013, and this is adding to the squeeze on consumer spending shown in the latest retail sales figures. We should expect this rise in inflation to continue as the impact of the weakness if the pound feeds through into higher prices for imported goods and services.
"Inflation is set to rise to around 3pc or higher in the months ahead - with prices likely to be rising faster than wages. The resulting squeeze on consumer spending will reinforce the slowdown in economic growth we are now seeing.
10.20am BST
Last week, the Bank of England warned that real wages would fall this year as rising prices erode households incomes.
Today's inflation figures show that they were right.
"We're now starting to feel the real impact of Brexit on our wallets. There's no escaping the fact that the luxury of low inflation is well and truly over with prices of goods and services rising left right and centre and the shiny new pounds in our pockets will unfortunately buy you less.
"Your household budget will be stretched as the cost of fuel, energy and anything that's made overseas is creeping up. The cost of your supermarket shop is rising too so you must act now to protect yourself from future struggles."
Inflation has gone from 0.3% to 2.7% in past 12 months... sharp post referendum sterling devaluation driving this, as you'd expect: pic.twitter.com/frQY61LZlA
10.13am BST
TUC General Secretary Frances O'Grady is urging politicians to heed the living standard squeeze and come up with policies to boost job creation and pay.
"The last thing Britain needs is another real wage slump. But rising prices are hammering pay packets.
"Working people are still 20 a week worse off, on average, than they were before the crash. That's why living standards must be a key battleground at this election.
10.06am BST
Ian Kernohan, economist at Royal London Asset Management, says workers are suffering as pay rises fail to keep pace with inflation:
"As expected, CPI rose in April to 2.7% , with rising air fares a major contributor thanks to the later date of Easter this year.
"The impact of rising air fares was partially offset by a fall in fuel prices, but at just above the 2% target, this rate of inflation is not high by UK standards.
"The rise in inflation for the third month in a row is likely to damage retirees buying power and is set to take out a serious chunk of peoples' nest eggs.
Many don't appreciate the true cost of inflation. For those who retired before 2010 and took out a fixed annuity, the cost can be staggering. As bills rise across the board, retirees on a fixed income begin to feel the inflation pinch. As we enter this period of increased inflation, one of the ways people can consider avoiding inflation eating away at their hard earned cash is to seek out alternative investment vehicles."
Higher electricity and clothing prices were somewhat offset by lower motor fuel prices, however the underlying inflation figure does indicate some inflationary pressures in the economy with the core CPI print increasing to 2.4%.
9.56am BST
Here's confirmation that UK real wage packets are now falling, with inflation rising faster than pay rises:
As UK inflation rises, the squeeze on earnings & living standards tightens. Real wages falling again, and likely to fall further this year. pic.twitter.com/GQsYy6K5Mi
9.56am BST
This chart shows how inflation is now rising at the fastest rate in almost four years, having jumped to 2.7% in April.
9.45am BST
Core inflation, which strips out volatile factors like food and energy, has also jumped.
Core CPI has leaped to 2.4%, from 1.9% in March, suggesting that underlying inflation pressures are building fast....
The above consensus core CPI is the interesting bit here.
...and core inflation jumps to 2.4%, highest since March 2013: pic.twitter.com/2dPXtIS54R
9.39am BST
9.35am BST
9.32am BST
Here we go! Britain's inflation rate has jumped to 2.7% in April, up from 2.3% in March.
That's higher than the City had expected.
9.22am BST
The FTSE is cling onto its record levels, as City traders bite their knuckles and wait for the April's inflation report to flash across their screens at 9.30am precisely...
#FTSE hits 7480p before the #UK #CPI data due in 10 minutes. Stronger #pound doesn't seem to bother so far.
9.21am BST
Economist Rupert Seggins has tweeted about today's inflation data, due in just 10 minutes....
(1/4) UK inflation expected to hit 2.6%y/y according to consensus forecast, with a 0.5% rise in core prices from 1.8% to 2.3% predicted. pic.twitter.com/fveBBvPDGz
(2/4) The energy price contribution turned last month and is going to carry on falling.
(3/4) Likely to be more of a rise in food inflation owing to previous global price increases. pic.twitter.com/tfFCIh9O35
(4/4) On past form, a sterling driven jump in core inflation is still a few months away. Consensus forecast evidently disagrees. pic.twitter.com/s0GkyLHpyk
9.10am BST
Germany's DAX has shrugged off the impact of the rising euro, and hit a new alltime high.
The DAX is up 0.2% at 12,834 points, led by chemicals firms Linde and Bayer, and Deutsche Telekom.
9.03am BST
Newsflash: Italy's economy only managed mediocre growth in the first three months of this year.
Euro area Q1 GDP growth, continued:
Italy still the laggard (+0.2% QoQ)
Netherlands bit disappointing (+0.4% QoQ)
8.55am BST
Connor Campbell of SpreadEx warns that this morning's UK inflation report, due in 35 minutes, could dent the Footsie's rally.
The FTSE is still in the all-time record high ballpark this Tuesday, though it faces a tough test with the morning's data.
The index is still being propped up by its commodity stocks, though at an admittedly reduced pace, with the oil and mining sectors still high on Brent Crude's recovery and the $900 billion 'Silk Road' infrastructure plan in China.
8.52am BST
Bad news from the Netherlands; its growth rate slowed to just 0.4% in the first quarter of this year, down from 0.6% in October-December.
8.45am BST
The euro has rallied to its highest level since the US presidential election.
The single currency has gained 0.5% this morning to $1.1027, a level last seen in November 2016, as traders anticipate today's eurozone GDP report at 10am BST.
#Euro just hits $1.1023, highest since Nov2016 ahead of GDP data. pic.twitter.com/COwOkIygno
8.32am BST
The FTSE 100 is continuing to scamper into uncharted territory; it's now reached 7475 points, 20 points higher.
8.30am BST
Telecoms firms, consumer-focused companies and energy providers are up this morning, with Vodafone, DIY chain Kingfisher and housebuilder Barratt leading the risers.
But easyJet is dragging the market back, after reporting that its losses have widened in the last six months.
8.11am BST
Boom! The FTSE 100 has hit a new all-time high at the start of trading.
The blue chip index has gained 8 points to 7465, beating the previous record of 7460 set on Monday.
7.58am BST
Britain's stock market could hit a new record high this morning, say spreadbetters IG, after closing at an alltime high last night.
#Europe market early trade closing in on yet more record highs for #FTSE100 & #DAX30 - https://t.co/27T6zARQee - losses can exceed deposits. pic.twitter.com/67XaxnCaGl
7.45am BST
Good morning, and welcome to our rolling coverage of the world economy, the financial markets, the eurozone and business.
World stock markets have hit fresh record highs overnight as the long rally refuses to fizzle out.
TIMES BUSINESS: FTSE takes Silk Road to another record high #tomorrowspaperstoday pic.twitter.com/X8EPHbVYoY
Clearly the big talking point yesterday was the punchy moves in the barrel courtesy of a determined and cohesive stance from the Saudi's and Russian's about extending the output cuts for a further nine months.
The market is always going to react when we see collusion between these two oil heavyweights, especially when they pull out a famous Mario Draghi line and pledge "to do whatever it takes" to bring down global inventories.
#Greece: Seamen, journalists walk off job ahead of general #strike. No ferries to, from islands for 48 hours. https://t.co/nbBnU0x6R3
.@Vodafone reports 6bn loss thanks to writedown of value of Indian business @BBCr4today
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