Wall Street climbs as FTSE 100 hits highest since 2018

FTSE  Traders work on the trading floor at the New York Stock Exchange (NYSE) in New York City, U.S., January 5, 2023. REUTERS/Andrew Kelly
FTSE 100 at highest since 2018 with US markets optimistic. Photo: Andrew Kelly/Reuters

The FTSE 100 and European stocks finished higher on Thursday, with the UK’s blue-chip hitting its highest level in over four years.

The FTSE 100 (^FTSE) rose 0.44% to close at 7,728, while the CAC 40 (^FCHI) in Paris climbed 0.72% to 6,918 points. In Germany, the DAX (^GDAXI) gained 1.02% to 14,924.

On Wall Street, stocks were higher as focus shifted to a key inflation reading due later in the week, which would provide clues on how aggressive the Federal Reserve's monetary tightening could be this year.

The Dow Jones (^DJI) gained 0.25% to 33,785 points. The S&P 500 (^GSPC) advanced 0.50% to 3,938 points and the tech-heavy NASDAQ (^IXIC) rose 0.87% to 10,836.

“The market is fighting back the Fed,” Swissquote Bank senior analyst Ipek Ozkardeskaya said. “The Fed says ‘we will hike the rates above 5%’, and investors reply ‘we don’t believe you; we think that you will not raise the rates above 5%!

“As a result, the financial conditions in the US are now neutral, while inflation, though easing, remains more than three times higher than the Fed’s 2% target. This means that the Fed will continue hiking rates even if it means slower economic growth.”

Read more: FTSE 100: JD Sports expects £1bn profit on robust recovery and rising sales

Back in London, retailer JD Sports (JD.L) led gains, up 6.46%, after it reported revenues growth for the 22 weeks to 31 December of more than 10%, which compared with growth of 5% over the first half of its financial year.

Fellow retailers Frasers (FRAS.L), up 3.71%, and Next (NXT.L), up 2.20%, were among the top risers.

Miners also pushed the UK blue-chip index higher, with Glencore (GLEN.L) up by 0.65%, Anglo American (AAL.L) climbing 1.26%, and Rio Tinto (RIO.L) rising 0.86%.

On the other end of the spectrum, housebuilder Barratt Developments (BDEV.L) tumbled 0.28% as it warned that the UK housing market has seen a “marked slowdown” in the last six months.

The UK’s largest housebuilder told the City that demand in the first half of 2023 is likely to be hit by rising mortgage rates and the cost of living squeeze, which will “undoubtedly impact trading”.

In a trading update for the half year to 31 December, Barratt warns that the outlook for the second half of its financial year is “uncertain”. Homebuyer confidence and the availability and competitive pricing of mortgages will be “critical to the health of the UK housing market in the coming months”, it said.

Read more: FTSE 100: Sainsbury's achieves 'record' Christmas despite rising cost of living

Sainsbury (SBRY.L) lost 2.20% despite a positive update and raised guidance from the supermarket group, with sales up 7.1% over the Christmas period. Investors are concerned about whether the good performance can continue amid a cost of living crisis.

Charlie Huggins, head of equities at Wealth Club, said: "This is a solid performance from Sainsbury's with the group raising its profits and cash guidance for the year, against an intensely competitive market backdrop. It seems that UK shoppers indulged in one final sales splurge in the run up to Christmas, benefitting Sainsbury's and its peers. However, with the slowdown in consumer spending yet to really bite, it's likely the environment will get tougher."

Meanwhile, Brent crude (BZ=F) rose and was trading at around $81 (£66.78) per barrel, even as an unexpected build in crude and fuel inventories in the United States, the world's biggest oil consumer, and economic uncertainty reignited demand worries.

In Asia, Tokyo’s Nikkei 225 (^N225) was up by 1.03% to 26,446 points, while the Hang Seng (^HSI) in Hong Kong rose 0.49% to 21,435. The Shanghai Composite (000001.SS) slipped 0.24% to 3,161 points.

Watch: Powell: Fed needs independence to fight inflation