Why has the FTSE 100 simply reached a brand new daytime excessive?

The FTSE 100 hit a brand new intra-day excessive on Friday (17 January), peaking at 8,508 factors within the early afternoon. It may be even larger by the point you learn this.

Cussed inflation, rising enterprise prices and threats of US commerce tariffs don’t appear to be holding anybody again.

The truth is, inflation information would possibly even have helped enhance optimism. The UK’s December determine fell to 2.5%, not fairly on the Financial institution of England’s 2% goal but it surely’s the appropriate path.

US inflation outlook

And the US core client worth index (CPI) dropped to three.2% 12 months on 12 months, with 3.3% anticipated. Once more nonetheless some solution to go, however that’s optimistic.

Sterling falls could have helped enhance UK inventory costs too.

Multinational firm earnings are intently tied to the US greenback, and the pound has slipped 9% from $1.34 in September to $1.22 as I write.

On the playing cards

I believe bull market indicators have been within the air for a lot of the previous 12 months, and I reckon it reveals within the banking sector.

UK traders appear to have been largely inward-looking for the previous few years. However a look at what’s been occurring to the Barclays (LSE: BARC) share worth reveals an enormous change.

Barclays shares are up 104% prior to now 12 months. Crucially, it’s perhap probably the most outward-looking and numerous of the large Footsie banks.

World banking

At Q3 time, Barclays reported a 6% rise in Funding Financial institution revenue, with a 3% enhance for World Markets revenue.

If the incoming US administration relaxes some laws relating to funding banking as anticipated, the world outlook for the sector would possibly get even brighter.

Analysts are already forecasting rises in earnings and dividends for Barclays within the subsequent few years. The expected dividend yield for 2024 is down to three% after the share worth rise, thoughts. So perhaps the shares are pretty valued for now.

Although Friday’s bullish inventory market is trigger for cheer, there’s a little bit of a fly within the ointment.

Causes for warning

The Christmas retail interval was disappointing, which I believe may put a drag on markets and maybe even pull the outlook for the banks again a bit.

Forecasters had predicted a 0.4% month-on-month rise for retail gross sales in December. However figures simply out from the Workplace for Nationwide Statistics as a substitute present a 0.3% drop.

Meals retailers confronted the largest hardship, with a 1.9% fall.

It raises the worry that the UK financial system may need shrunk within the ultimate quarter of 2024. Nonetheless, there’s a brilliant aspect even to that. Together with the drop in inflation, it absolutely boosts the possibility of an rate of interest minimize at February’s Financial Coverage Committee assembly.

What does it imply?

So what ought to traders do concerning the booming FTSE 100? Promote up and pocket some revenue? Or perhaps pile in now it appears to be like to be on the up?

I’m happy to see the optimism, but it surely doesn’t change something for me. I’m seeking to spend money on corporations with nice long-prospects at good costs. Identical as at all times.