Stay informed with free updates
Just sign up to Actions myFT Digest: delivered straight to your inbox.
The FTSE 100 index closed at an all-time high on Friday as stocks in the US and UK headed for their best week this year, boosted by signs that major central banks are on track to cut interest rates. interest.
London’s main stock index rose 0.9% to 7,948.79 after Bank of England Governor Andrew Bailey told the Financial Times that markets were right to expect more than a reduction in financing costs for this ‘year.
The FTSE 100 was already up 1.9% on Thursday after the BoE left interest rates unchanged and is close to its February 2023 peak of 8,047.06.
The index’s gains came amid a global stock rally that followed Wednesday’s Federal Reserve meeting, in which the U.S. central bank reiterated its forecast for interest rate cuts of three-quarters of a point. this year.
Wall Street’s S&P 500 index rose 2.4% this week, putting it on track for its best week since December, and futures contracts pointed to further small gains in Friday’s trading session in New York. The Nasdaq Composite is up 2.7% from last Friday.
The European regional Stoxx 600 also pushed higher and gained 1.1% for the week.
“Most developed central banks this week unequivocally confirmed their easing trend,” said Frederik Ducrozet, head of macroeconomic research at Pictet Wealth Management, referring to the prospect of rate cuts.
Traders in swap markets are currently pricing in interest rate cuts of three-quarters of a point by the BoE by the end of 2024.
The implied probability of a first cut by June has risen to around 80%, from 50% at the start of the week. The price is similar for the Fed, with cuts expected starting in June or July.
The Swiss National Bank on Thursday became the first major central bank to begin easing monetary policy, unexpectedly cutting the main interest rate by 0.25 percentage points to 1.5%.
Bailey said rate cuts would be “in play” at future BoE meetings this year, adding that the fight against inflation was “an increasingly positive story”.
The BoE governor said things were “moving in the right direction” in the fight against inflation. At this week’s meeting of the Monetary Policy Committee, two previously hawkish politicians abandoned their hike calls, instead voting with the majority to keep rates unchanged.