- Politburo follows Chinese central bank with efforts to lift flagging economy
- But lower oil prices weigh on the FTSE 100, limiting blue-chip gains
- Federal Reserve’s preferred measure of US inflation fell to 2.2 per cent
The FTSE 100 capped a week of gains on Friday as global markets moved higher on hopes of further looming interest rate cuts and a major Chinese stimulus package.
The blue-chip index opened higher following continued outperformance of Asian markets over night, and finished up 35.85 points at 8,320.76.
The FTSE 100 hit an all-time-high of 8,445.8 on 15 May, when expectations the Bank of England would move ahead with its first base rate cut ahead of the US Federal Reserve combined with weaker sterling to boost exporters.
Federal Reserve’s preferred measure of US inflation comes in at 2.2%, while bumper Chinese stimulus measures lift global markets
China’s Politburo leaders on Thursday announced they would beef up ‘necessary fiscal spending’ to help meet the world’s second-largest economy’s annual growth target of 5 per cent.
It follows a period of deterioration of economic data, sparked by crises within China’s enormous property sector.
Government intervention comes after China’s central bank pulled the trigger on stronger than expected monetary stimulus measures on Tuesday, including interest rate cuts and the easing of some mortgage rules.
This has driven China’s CSI 300 and Hong Kong’s Hang Seng indices 14.5 and 13.5 per cent higher, respectively, since market close on Monday.
The impact on the FTSE 100 has been limited so far, largely as a result of lower oil prices weighing on the index, with Brent crude now trading at around $71 a barrel having fallen by more than 24 per cent over the last year.
However, the FTSE 250 has benefited from China exposed constituents like Burberry and Prudential.
Richard Hunter, head of markets at Interactive Investor, said: ‘There will of course be a time lag between the announcement of the stimulus package and its effects washing through to the economy, but the very fact that the authorities have moved away from their previous inertia has energised both domestic and international markets alike.
‘Chinese blue chips…[are at their] highest since around the time of the global financial crisis in 2008, while the positive reverberations have extended to most commodity prices and sectors with a high Chinese exposure worldwide.’
Meanwhile, eurozone data out today paints a mixed picture, with French consumer prices rising less than expected, Spanish inflation easing to 1.7 per cent and German unemployment growing slightly beyond forecasts. Equity markets across the bloc were up in early trading.
US core personal consumption expenditures (PCE) price index figure – the Fed’s preferred measure of inflation – fell more than expected to 2.2 per cent in the year to August.
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