The London stock market clocked up its best week since the start of the year as the outlook for the global economy brightened and British chip designer Arm lit up Wall Street.
On another upbeat day for investors, the FTSE 100 index closed up 0.5 per cent at 7711.38, taking gains since Monday morning to 3.12 per cent.
That was the best weekly performance since the first week of the year.
Boost: On another upbeat day for investors, the FTSE 100 index closed up 0.5 per cent at 7711.38
The gains in London were echoed across Europe with the Dax up 0.6 per cent in Frankfurt and the Cac 1 per cent better off in Paris.
It followed a blockbuster debut by Arm on the Nasdaq on Thursday that saw shares in the British chip designer jump 25 per cent – to value it at over £50billion.
The stock added around another 2 per cent last night. Meanwhile, the price of oil hit a ten-month high above $94 a barrel.
The latest rally on global stock markets came as official figures in China showed retail sales and factory output growing at a faster pace – suggesting recent measures to shore up the world’s second largest economy are starting to bear fruit.
Copper prices rose again to record the biggest weekly gain since late July on hopes of renewed demand for raw materials from China.
‘There’s a growing sense of optimism among a cohort of investors who believe that Beijing’s recent initiatives to stimulate the economy and stabilise financial markets are showing signs of success,’ said Stephen Innes, managing partner at SPI Asset Management.
But he warned that ‘a single month of positive data isn’t sufficient to confirm a sustained path to recovery’.
Euro’s losing streak
The euro has suffered its longest ever losing streak as investors bet that interest rates in the region have peaked.
The single currency has fallen for nine weeks in a row against the dollar – from above $1.12 to below $1.07 – in its worst run since it was created over two decades ago.
The pound has also fallen from above $1.30 to around $1.24 but eked out a couple of weekly gains along the way.
]Both the pound and the euro have weakened amid signs that interest rates in the UK and eurozone are at, or close to, their peaks.
Officials in the US have suggested that rates there will stay higher for longer than thought.
Sentiment was also boosted by signs that interest rates in the eurozone have now peaked after the European Central Bank this week raised them to a record high of 4 per cent.
Russ Mould, investment director at AJ Bell, said ‘a strong debut from Arm’ and hints from the ECB that there will be no more rate hikes were ‘helping to lift spirits’, adding: ‘That’s exactly what investors want to hear, namely the end of the rate hiking cycle and excitement around growth stocks once again.’
Investors remain wary, however, ahead of crucial meetings of the US Federal Reserve and Bank of England next week.
Analysts said the Fed’s next two meetings – next week and in November – will be crucial to developments on financial markets for the rest of the year.
‘If we get a pause in September and November, that could lead to a nice year-end rally, which will feed the belief that the next move by the Fed will be a rate cut in 2024,’ said Robert Pavlik, senior portfolio manager at Dakota Wealth in Connecticut.
The rise in the oil price, however – amid production cuts by Saudi Arabia and Russia – spells misery for motorists at the pumps as petrol prices will likely increase.