THE FTSE 100 climbed to a five year peak during yesterday’s trading, breaking through another psychological barrier.
London’s main blue chip index reached 6,412.44 points as investors were boosted by renewed belief that the Bank of England could be set for more quantitative easing.
It was the first time since January 2008 that the FTSE had passed the 6,400 level.
Yet the market eased later in the day to close up by only 0.26 per cent, at 6,395.37. Analysts were divided over whether the FTSE’s failure to hold about the 6,400 mark could result in profit-taking, or whether the index will have another push at closing above 6,400 today.
“There are reasons to be bullish but we do expect a light correction of around three per cent over the next week,” said JN Financial trader Rick Jones, who expects the index to retreat to around 6,200 this week.
“There’s an opportunity to book some profits.”
Equities have enjoyed a strong rally so far this year, as risk appetite resumes on hopes of macroeconomic recovery.
The prospect of further asset purchases from the Bank have also bolstered the FTSE.
“Good economic data from the UK and across Europe gave investors yet more reason to buy equities as even though the current economic environment may not look all that bright, there are indications that things are on the mend,” commented Capital Spreads in a note.
Another positive set of labour market data for the UK, showing a further jump in the level of employment, contributed to a rosier outlook.
“Unemployment in the UK fell once again and the number in work reached a new record high showing that we may not be producing all that much, as evidenced by recent GDP figures, but at least jobs are being created,” Capital added.
The FTSE has been on the rise since sinking to around 5,260 last summer, when the Eurozone crisis had flared up again.
It started the year around the 5,900 mark but broke through 6,000 and recorded its best January since 1989 last month, gaining 6.43 per cent.