The FTSE 100 made steady progress on Wednesday, pushing back towards record highs, as hopes grew that the US Federal Reserve will lower interest rates in the coming months.
Joshua Mahoney, analyst at Rostro, said markets are confident that the Fed will slash rates in the months to come.
He added: “Market pricing for a rate cut at each of the remaining three meetings of 2025 have tipped above the 50% mark, meaning that it is now the base case scenario that we see rates at least 75bp lower by year-end. No wonder markets are in buoyant mood, with a Goldilocks scenario developing.”
The FTSE 100 index closed up 17.42 points, 0.2%, at 9,165.23. The FTSE 250 ended up slightly at 21,851.56, but the AIM All-Share finished 1.73 points lower, 0.2%, at 757.54.
In Europe, the Cac 40 in Paris rose 0.8%, while the Dax 40 in Frankfurt advanced 0.7%.
In New York, the Dow Jones Industrial Average was up 0.7%, the S&P 500 was 0.2% higher, hitting another all-time high, and the Nasdaq Composite advanced 0.1%.
The upbeat mood followed broadly in line with US inflation figures on Wednesday, which showed a limited impact from tariffs so far.
Bank of America said tariffs have not been the “inflationary force we expected”.
The building conviction towards US rate cuts put the dollar under pressure and saw bond yields ease.
The pound climbed to 1.36 dollars late on Wednesday afternoon in London while the euro rose to 1.17 dollars.
The yield on the US 10-year Treasury was at 4.23%, trimmed from 4.30%. The yield on the US 30-year Treasury was 4.83%, narrowed from 4.89%.
Pegging the gains in London, BP fell 1.2% and Shell dipped 0.3% as oil prices declined.
A barrel of Brent fell to 65.51 dollars late Wednesday afternoon, from 66.29 on Tuesday, as the International Energy Agency further trimmed its forecast for crude oil demand this year, citing softer global economic growth and market uncertainties.
For 2025, the association of industrialised nations now expects demand to rise by only 680,000 barrels per day, according to the monthly report released in Paris.
The previous forecast had anticipated an increase of 700,000 barrels.
XTB analyst Kathleen Brooks commented: “The peak of the supply glut will be at the end of 2026, according to the IEA, which could keep a lid on the oil price for the long term.
“The discussions between President Trump and President Putin on Friday could also be weighing on the oil price. If they do find a solution to the war in Ukraine, then it could exacerbate the supply glut even further, and the bias could be to the downside for the oil price as we lead up to the talks. For the FTSE 100, this means that big hitters like Shell and BP could come under further downward pressure.”
