On the first day of trading since the Christmas break, Britain’s blue-chip index has reached an all time high. The FTSE 100 closed at 7106.68. Thirty seven points higher than the previous record of 7103.98 set in April 2015.
The rise in the FTSE 100 is believed to be driven by mining companies hoping for a strong US economic recovery next year. Anglo American was 3.5% higher, while BHP Billiton was 3.29% up. The weaker pound, driven by Britain’s Brexit decision is also believed to have helped the FTSE 100 reach a new height.
On Tuesday, Sterling fallen by 0.4% against the dollar at $1.23 and 10% against the Euro since the June EU referendum.
Conversely FTSE 100 companies often make most of their profits abroad. The weaker pound has in effect boosted the FTSE 100 performance.
David Cheetham, market analyst at XTB, said, “Observers of the markets have for many years noticed a strong propensity for stocks to rise in the period between Christmas and the New Year and this phenomenon appears to be playing out once more.”
Chris Beauchamp, chief market analyst at IG, also put forward a reason for the FTSE 100 high. He said, “The FTSE 100 is the star performer today, helped on its way higher by an excellent turn from the index’s mining contingent. The sector was one of the really big winners in 2016, making a remarkable comeback over the past twelve months, and it makes sense to think that investors are looking to juice a few more points out of the rally as the year-end approaches.”
In addition to the mining sector and the weak pound, rising oil prices have also benefited the FTSE 100. With sterling being in a volatile state, it is unclear how much further the currency will fall.