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

By Sruthi Shankar

(Reuters) -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%.

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.

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.

“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)